Charts and diagrams
Forex charts are based on market action involving price. Charts are major tools in Forex trading. There are many kinds of charts, each of which helps to visually analyze market conditions, assess and create forecasts, and identify behavior patterns.
Most charts present the behavior of currency exchange rates over time. Rates (prices) are measured on the vertical axis and time is shown of the horizontal axis.
Charts are used by both technical and fundamental analysts. The technical analyst analyzes the “micro” movements, trying to match the actual occurrence with known patterns. The fundamental analyst tries to find correlation between the trend seen on the chart and “macro” events occurring parallel to that (political and others).
What is an appropriate time scale to use on a chart?
It depends on the trader’s strategy. The short-range investor would probably select a day chart (units of hours, minutes), where the medium and long-range investor would use the weekly or monthly charts. High resolution charts (e.g. – minutes and seconds) may show “noise”, meaning that with fine details in view, it is sometimes harder to see the overall trend.
The major types of charts:
• Line chart
The simplest form, based upon the closing rates (in each time unit), forming a homogeneous line. (Such chart, on the 5-minutes scale, will show a line connecting all the actual rates every 5 minutes). This chart does not show what happened during the time unit selected by the viewer, only closing rates for such time intervals. The line chart is a simple tool for setting support and resistance levels.
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