CHAPTER 4 - LESSON 2
Charts are a key tool used in technical analysis by expert analysts.
There are several different chart types and time frames that traders use to analyze price action in the forex market.
Here are some chart types expert analysts use:
The simplest type of chart, and it shows the closing prices of a currency pair over a specific time period.
• Line charts are useful for identifying trends in the market.
Shows the open, high, low, and closing prices of each currency pair over a specific time period. Each bar represents a specific time period, such as a day or an hour.
• Bar charts are useful for identifying price volatility and momentum.
Similar to a bar chart, but instead uses candlestick shapes to represent the open, high, low, and closing prices of each currency pair.
• Candlestick charts are useful for identifying price patterns and trends and can also provide more information than line or bar charts.
Expert analysts will also use different time frames to analyze price actions in the forex market.
Below are some common time frames used in forex trading:
These time frames include 5-minute or 15-minute charts.
• Short-Term time frames are used by traders who make frequent trades throughout a day and look to profit from short-term price movements.
Time frames such as 1-hour or 4-hour charts.
• Medium-Term time frames are used by traders who hold positions for a few days or weeks.
These time frames include daily or weekly charts.
• Long-Term time frames are used by traders who hold positions for several weeks or months.
It’s important for traders to choose a chart type and time frame that best suits their trading strategy and style. Keep in mind that different chart types and time frames can provide different information and may lead you to different trading decisions.
To recap, charts are a key tool for technical analysis. Expert analysts use line charts, bar charts, and candlestick charts to assess different price actions. Based on their trading style, they review the chart’s data over short-term, medium-term, or long-term time frames to identify trading opportunities.
We will now explore key technical indicators experts use while trading.
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