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Technical analysis is the assumption that the past will duplicate itself and if an investor can read and understand chart formations, they will be able to predict what the market will do next. Forex graphs are not any different then stock charts. For those who have traded stocks already and are also comfortable with the way to read those formations, then reading fx charts will probably be very easy. The way to interpret the lines on a chart. Each day will have a vertical line, which represents the highest and lowest the currency sold for on that day. With Forex currency trading, 5-minute updates are accessible. The horizontal line on the left of the line vertical line represents the opening price and also the horizontal line to the right of the line represents the closing price. This will also be described in the candlestick formation. The candlestick formation has a box which is either filled or empty having a stick out the top and bottom. Various traders check out a candlestick formation, that is much easier to read. The box of the candlestick is blank if the beginning price is lower then the end price, if the start price is higher then the end price, the candlestick box if filled. This permits the investor to visually tell how the market is moving. If each box is empty then that means the cost continues to be moving up. If each box is filled, it means the price continues to be declining. This allows an investor to simply spot a trend that may be forming. The simplest trend to spot on the forex currency chart is definitely an uptrend or a downtrend. That a strict uptrend has each candlestick opening lower and closing higher. That a general uptrend goes upward but doesn't necessarily have higher highs every period. This also holds true for the downtrend. That a strict downtrend opens higher then closing for every period. A general downtrend has prices going down but not necessarily each price period. Many traders usually concentrate only on a open price and also the close price. The fluctuation between the open and close for whichperiod will not interest several buyers. Support and resistance lines are the next chart formation that a beginning investor should become familiar with. A support line is called a bottom or the floor where prices may slip to but they appear to bounce back from. Resistance line is the top or the ceiling where prices move up to but seem to fall once they get near whichline. The prices do not have to stay near these lines. There may very well be numerous up and downs almost like a bouncing ball, where the line is reached but never crosses. This can transpire over minutes, hours, days, weeks, months, and years. It depends on the kind of investor you are as to what time period you will consider when deciding the relevance of that a support or resistance line. The interesting thing about these support and resistance lines is that after prices have crossed them, they continue to move in whichdirection for a while. Several buyers will seek that a support or resistance line, then wait for the prices to break those lines before they enter a trade. Those are the main chart formations that any investor must be knowledgeable about before they start their investing in the Forex. I will continue with future articles which will get into some specific chart formation and what they are able to mean to you the investor.
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