Forex
How to read a forex chart
The chart shows a lot of information, more than most people realise. We are going to run through a few of the basic things that a forex chart can show us before you even start adding indicators and that sort of thing. This is not part of the trading strategy, but rather showing you how to read a forex chart.
So let’s take our EUR-USD as an example.
Currency pair, time frame and price values on your forex chart
The above forex chart is the EUR USD currency pair, with no added indicators or objects. We recolour our charts like this so they’re easier on the eye and we find it reduces our headaches!
Have a look at the top left of the chart, you will see our first bit of information. This is actually very important to check when loading a chart, mainly to stop you from making a mistake by entering a trade on the wrong currency pair. It does happen, and can be avoided easily.
From left to right, we start off with the currency pair. In this case, we are trading the EUR USD pair. Straight after that, we have the time frame for the forex chart we are looking at. Here we see H1, which means a 1-hour chart. That means every candlestick we see on the chart represents 1 hour of time.
Then we have a series of 4 numbers. In order, they are showing us the open, high, low and close prices of the current candle. Now they refer to the last number as being the close, but it can’t be closed because it hasn’t closed yet!
So this is usually the current price or at least very very close to it.
So just from that one little section on the screen we can confirm we are looking at the right forex pair, the right time frame and we can check the OHLC (open, high, low and close) of the current candle.
Times and dates
At the bottom of the chart we have a series of dates and times.
This is exactly what you think it is. Simply showing you the date and time of certain sections of the chart. If you add a vertical line it will give you a more precise date stamp, which we will cover more in the Meta Trader tutorial.
Forex prices
And on the right side of the chart we see the vertical list of numbers, this is showing us the various prices from bottom to top. You’ll see a price with a black background, this is the current exchange rate between the currencies.
So in this example, we see that the current rate is 1.13156, and on the EUR/USD forex chart this tells us that 1 Euro is the same value as 1.13156 USD.
As the chart goes up, it means that the currency on the left is getting stronger compared to the one of the right.
So in the case of the EUR/USD forex chart this means that either the Euro is strengthening or that the United States Dollar is getting weaker.
How the forex chart quote the prices
Reading a forex quote is not that different from anything that has value. Let’s imagine you had a cellphone you wanted to seel. And this phone is worth $50. You have 1 phone, and it is worth $50. That’s like saying the exchange rate between your phone and USD us 1.50000
If we take the example of the chart above, the EUR USD price is showing 1.13156. So 1 Euro is worth 1.13156 USD.
We right this down as EUR/USD = 1.13156. The currency is written on the left, in this case, the EUR is considered the base currency. And the currency on the right is the quote currency.
