Forex Basics - How to Read a Chart

To many of you looking a any kind of chart, whether it be Forex or Stocks, is like trying to read Mandarin. Hopefully after reading this you should be somewhat relieved that it's actually not complicated at all!

Firstly we are going to take a look a close look at a candlestick on a up day:

On most charting software, green is up, and red is down.

1. Open - this is the price at which this particular currency pair closed the day before, therefore what price it opened for that day.

2. Close - this is the price which this particular currency pair closed at for the day, and which will be the price trading will start at for the next day.

3. High -  this is the highest price which this particular currency pair reached for that day

4. Low - this is the lowest price which this particular currency pair reached for that day

The currency market is open 24/5, you may think that a new bar is made at midnight but you'd be wrong. A new bar is made for the next day at 10:00pm. So the market opens for the week on Sunday 10:00pm and runs right the way through to Friday 10:00pm make a new bar every night at of course, at 10:00pm. Easy. (I am always referring to the daily chart, there are many other time frames)

The most basic thing a new trader will learn is to: BUY LOW, SELL HIGH
This sounds extremely simple, although the trick is to work out where the low and the highs are.

The above is an example of this theory. Now this would be the perfect year of trading if you caught all of these trades. Nobody can predict the market like this, so catching these moves are extremely unlikely especially if you are a conservative trader. Although, even if you caught 3-5 of these trades on one currency pair, you're going to be extremely well off!

A trend is when a currency pair is predominantly going in one direction. A trend consists of Runs and Pullbacks:

  Green is the run, and red is the pullback. To make money in a down trending market you have to sell at the top of a run and and buy at the bottom, and vice versa for a up trending market.

 Always trade with the market, never against it. This means never buy in a down trending market as you will get smashed when the run starts again.

I will continue this lesson in my next post. Make sure to add me to your circles so you don't miss any information.

If you have any questions, post them in the comments and I will happily answer!