Friday 1 February 2008

So What Exactly Are Charts In Forex Trading?

A chart in financial trading is a sequence of prices plotted over a specific time frame. The vertical axis (y-axis) represents prices and the horizontal axis (x-axis) is the time scale. Prices are plotted from left to right across the x-axis with the most recent being the furthest right.

Although charts are used almost exclusively in Technical Analysis, they are also useful in Fundamental Analysis. A chart makes it easy to spot the effect of a specific event on a currency's prices and its performance over a period of time.

What time frame is chosen for a chart depends on how compressed the analyst wants the data to be. A chart can be intraday, daily, weekly, monthly, quarterly or annual. The less compressed the data is, the more detail is shown.

Most commonly, charts used for the purpose of Forex trading show intraday (price movements within the period of a day) and daily data - daily data is intraday data compressed to show each day as a single data point. However, longer-term charts are also useful to show the larger picture and get an idea of historical price trends.

In the next two posts we will be looking at two of the most common types of chart - bar charts and candlestick charts. As we said yesterday, there is a lot more detail to this subject than can be provided in this blog, and you can learn it all in much more detail through the amazing tutorials that Easy-Forex provide when you register with them.

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