Forex Course 102-Know How to Read Currency Pair Charts

 

Know how to read currency pair charts

There are different types of charts: Line charts, bar chart charts, dot charts, etc.

 

However, there is one type of chart that every forex trader agrees on which is the “Japanese candlesticks” or “candlesticks” charts , which we will present to you in this lesson.

 

Japanese candlestick charts are made up of “candles”

bullish candle and bearish candle

candlesticks picture

 

With the Japanese candlestick method, the chart is therefore made up of a succession of “candles”, each “candle” (see above) representing a period. On an M5 chart, each candle represents a 5 minute period. On an H1 chart, each candle represents a 1 hour period, and so on.

 

When the price at the beginning of the period is lower than the price at the end of the period, it means that the prices have increased and the candle is blue (or another colour depending on your platform, the important thing being that the bearish and bullish candles are coloured different).

 

In this case, the bottom of the candle represents the price at the beginning of the period, while the high represents the price at the end of the period. The upper “wick” represents the highest price reached during the period, conversely for the low wick.

The advantage of this type of chart is therefore to provide as much information as possible.

 

This is undoubtedly the preferred chart, if only because 99.9% of traders ONLY use this type of chart.

 

The other advantage of Japanese candlestick charts is the possibility of directly analysing the different types of candles that can appear on the charts.

 

You will find some examples of this below:

 

Doji candlestick

 

This type of candle appears when the price at the start of the period is equal to the price at the end of the period, and the prices have not changed during the period.

Interpretation 1: Flat calm

 

This particular candle (called a “doji”) signifies that the prices have moved up and down during the period, but end the period at the same price as they started it.

Interpretation 2: Hesitation, possibility of reversal.

 

This candle means that the end-of-period price is the same as the start-of-period price, but that prices have "tried to go down" during the period.

Interpretation 3: Possibility of a bullish reversal

 

Conversely, here the prices have "tried to climb", but end at the same level at the end of the period.

Interpretation 4: Possibility of a bearish reversal

 

So that is all on how to read currency pair charts. In our next lesson, we will look at the advantages of forex trading over other financial markets.

 

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