How to Read a Currency Chart for Trading: An Expert's Guide

When trading currencies, it is essential to understand how to read a currency chart. A currency chart is a graphical representation of how the price of a currency pair changes over time. The bottom of the vertical bar indicates the lowest traded price during that period, while the top of the bar indicates the highest price paid. The vertical bar itself indicates the trading range of the currency pair as a whole.

As price fluctuations become increasingly volatile, the bars get bigger. For example, if you choose a 15-minute time frame, each candle on the chart will show how prices developed over a 15-minute period; the only exception will be the candle located at the far right of the chart, which will show the real-time prices for the current (incomplete) period. On these charts, exchange rates usually have several decimal places, allowing accurate price movements to be followed. As you become more comfortable reading the charts, you can start using technical indicators to learn even more about the current evolution of the price of an asset and to measure the rate of market volatility, as well as changes in value.

The first currency is called the “base currency” and the second is called the “exchange currency”, and the undulating line on the graph indicates how much 1 euro in USD costs over a given period. Despite this, it is important not to clutter up the charts or use too many indicators, as this can cause paralysis in decisions or information overload. Once again, the line will be green if the price of the currency pair rose during the given period, closing at a price higher than the one it opened, and red if the price of the pair fell during the given period and will close at a lower price than the opening price. Bar chart: By expanding the line chart in more detail, the bar chart includes several more key pieces of information that are added to each data point in the market.

Brand graphics print out prices based on a certain number of transactions that have been made in that market. Because candles can show a lot about market activity, there is specific terminology about what can be seen on these charts. However, once you become familiar with foreign exchange markets, candlestick charts are likely to become your most useful type of chart overall. For example, using stochastic, a reading above 80 implies overbought conditions and traders will seek to sell; while a reading below 20 implies oversold conditions and traders will seek to buy.

On IG trading platforms, you can choose how often new data is represented on a chart by selecting a time frame, which ranges from one point per point to an entire month. It can be 100 transactions, 1000 transactions, or basically 10,000. The more tics there are, the more popular this currency pair will be right now. In general, this type of chart is less detailed but also easier to understand than a brand chart and provides an overview of movement of a currency pair.

This is useful because it means that there must be a clear and pronounced change in price before it appears marked on the chart. If you've ever traveled abroad or anywhere else in the world, you've probably had to exchange or trade currencies. Understanding how to read a currency chart is essential for successful trading in foreign exchange markets.