Forex Charts – FX Guide
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Almost everyone is looking for a source of alternative income. Kenyan traders who diversify their income streams can easily achieve financial stability and live the life of their dreams. The majority of the investors prefer to trade in the Forex market after exploring different sources of additional income.
A small amount of capital can be used to start trading in the retail trading industry. However, it’s not enough to have access to the retail industry. The key to successfully trading the Kenyan market is learning to read the Forex charts like a pro. If you are interested in learning more about forex charts and their importance, you must read on!
How to read and identify trends using Forex charts
For those interested in entering the forex industry, learning the major charts, calculating results, and understanding the relationships of live data are of utmost importance.
Forex trading in Kenya is a risky business, which is why you need to prepare yourself with a background of knowledge about different methods to increase your chances of success.
Identifying the signals that cause price changes and reasons for low and high volatility through forex charts enables a Kenyan trader to make educated predictions for the market and make informed trades. The key to successful trading in forex is understanding why changes occur.
What is a Forex chart, and why should you use them?
To begin with, it is essential to understand what forex charts are and what they do. A forex chart shows how two currencies fare over a period and visually represents their relative price movements.
If you like, you can compare any pair of currencies and examine their movement over time. Monitoring the signals and patterns in forex charts can indicate how the currencies may change in the future.
Traders can use forex charts to analyse and decide where to invest their funds. Forex traders in Kenya can analyse and identify trends using a variety of charts and interpretations to uncover good investment opportunities.
How to read forex charts?
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If you want to trade successfully in the Kenyan forex market, you must read and interpret forex charts accurately. The ability to read live forex charts, as well as real-time trading charts, will assist you in controlling the market and spotting trends, allowing you to take calculated moves to profit from market opportunities.
You can choose a time frame in most forex charts and see data over 24 hours, but most forex charts default to a daily time frame. Depending on your requirements, you can change this to time frames representing minutes or years.
Transverse forex charts over short or long periods allow you to keep track of currency rate fluctuations to the fullest extent possible.
Different types of Forex charts
Charts for forex can be displayed in various ways, including line charts, bar charts, and candlestick charts. Let’s take a look at what each type of chart means.
The time will be shown on the x-axis, and the exchange rate will be displayed on the y-axis in a typical forex chart.
Line charts
The easiest chart to interpret is a line chart. The line shows the closing price from one day to the next, and when viewed collectively, they show the peaks and troughs of the currency pair.
Bar Charts
Bar charts are more difficult to read than a line forex chart, but they provide more information. These charts allow you to see the opening and closing prices of currency pairs, as well as their highs and lows.
A bar’s bottom represents the lowest traded price during a particular period, while its top represents its highest. Thus, an overview of the pair’s overall range can be seen at the top of the bar.
The horizontal hash on the left side of the chart displays the opening price, and the horizontal hash on the right displays the closing price.
Candlestick charts
Just like bar charts, candlestick charts depict high-to-low trading ranges using vertical lines. A middle block is also displayed, so it is possible to interpret the range between the opening and closing prices.
Filling or colouring the middle block means the pair closed at a lower price than they opened.
It was higher than the opening price due to an unfilled or different coloured middle block.
How to identify Forex trading patterns using Forex charts?
Traders can use forex indicators to explain why certain currency movements may appear on the charts. These are the most popular and reliable forex indicators out there, but there are a variety of other indicators.
Simple Moving Average line
The indicator is used most frequently by forex traders. Essentially, SMAs are calculated by summing up the closing prices for a period and dividing it by the amount of time in that period.
Simple moving averages (simple moving averages) illustrate a security’s price trend (the direction and momentum of the price). In the example above, a rising simple moving average indicates an increasing price. Conversely, if the price trend of security is declining, the opposite is true.
Bollinger bands
A squeeze occurs when the bands come together. When this happens, there may be trading opportunities appearing soon.
It represents a reduction in volatility and an increase in the likelihood of exiting a trade if the bands are wider apart.
A visual representation of these changes and predictions is provided on the graphs.
Changes in Bollinger bands are based on three calculations:
- Initially, the first or middle Bollinger band measures the moving average of the closing price
- This second line is the upper line calculated by adding the standard deviation to the moving average line of the close,
- In the third line, which represents the lower Bollinger band, the moving average line is subtracted from the standard deviation to arrive at the Bollinger band.
Relative Strength Index
In the markets, RSI is used to identify oversold conditions.
Scales range from 0-100. An oversold reading below 30 indicates that the market is oversold, indicating that traders should consider buying.
Overbought readings above 70 indicate that traders should consider selling.
Having a basic understanding of forex charts and how they are displayed will allow you to look at trends between currencies. Additionally, the ability to identify these trends using forex indicators helps you predict market changes, especially during high and low volatility periods.
Selection of the trading platform
Forex charts can only be read effectively on high-end trading platforms. You will not be able to execute professional trades if you rely on a low-end trading platform. Neither the low-end trading platforms nor their price feeds are accurate.
Therefore, you will have a difficult time analysing the data in real-time market dynamics. So, choose your broker carefully and make sure your trading environment is professional. Start trading in a demo account rather than with real money. You will increase your chance of making a profit by becoming comfortable with demo trading.
Analyse the candlestick charts
Kenya’s professional traders always analyse candlestick charts. You won’t receive critical information about the opening and closing price of the candle if you use a line chart.
Charts that use candlesticks can help you determine which buyers and sellers are strong. Once you become comfortable with the strategy, you can gradually improve your skills by using candlestick chart patterns and taking trades at the major support and resistance levels.
By learning about the candlestick pattern, you can expect to understand the Forex market’s key movements. Make sure you study the candlestick patterns and use them professionally.
Analyse the support and resistance
You need to know how to analyse the support and resistance levels of the Forex chart properly to read it correctly. One cannot succeed as a trader if one doesn’t understand how support and resistance levels work.
In the lower time frame, the support and resistance levels may not be as accurate as they appear. Therefore, spend some time evaluating the trade setups in the higher time frame.
Even though it will be boring, it is the most effective way of determining the quality of trade signals. It would be best if you never tried to shortcut the trading process. Instead, establish a critical zone for buying and selling.
False spikes
It is not uncommon to see extreme false spikes in the chart of the market. Typically, these spikes occur immediately after the news is released. You can relate these spikes to the fundamental data by studying them.
As a result, your trade execution process will become much more efficient and easier. The high-impact news can also prevent you from taking the trade during these times. After you stop dealing with such big spikes, you won’t have to deal with the major news releases.
It won’t take long for your performance to improve and your confidence in your trade execution process to increase.
Chart patterns
While analysing a chart, be sure to look for major chart patterns. With the right skills to analyse chart patterns, you can rapidly improve your trading skills and make large gains without facing a great deal of difficulty.
Be careful not to get sucked into this market, thinking you know everything. Instead, develop your skills on the demo account. Learn the basics of chart patterns. By becoming comfortable with the chart pattern trading strategy, you will trade like a pro in no time.
Importance of charts in Forex trading
Even though Forex trading in Kenya is a very lucrative way to invest, you need to conduct some research to determine which currency pairs to invest in at what time for maximum profits.
It is possible to predict the movement of the value of this currency in several different ways; however, the majority of investment decisions rely on certain Forex charts. In short, these charts provide you with historical data on a particular Forex pair. These charts will usually show several prices over several timeframes.
It is usual to see the price range for a specific currency compared to others and the average price. By having this information, you can use these charts to predict stock movements in the future and make trades accordingly.
Be sure of the timeframes
When comparing Forex charts, it is also important to consider the timeframe. For example, when you are an active trader, your charts need to update at smaller intervals to make your trades quickly.
The chart should show you the currency price at intervals of one minute or five minutes per day. You can then identify times when trends occur and take advantage of these movements in price with your trades.
Long-term investors will want to find charts that show the performance of a currency pair over a longer period, and some may only require the daily price of a currency over a month to make their trades. When choosing a chart, ensure that the time frame corresponds to the investing window you are interested in.
Check with your broker
Many brokers offer such charts as part of their services, and you can easily find them online. The easiest way to view a chart once you open an account is to select the time frame you want to view and then adjust the time frame accordingly.
Many brokers provide detailed analysis and the basic Forex charts that can predict when it is best to invest in a currency pair for the most profits. A combination of complex comparison algorithms and charts is applied to identify specific periods of volatility that can be exploited through a timely investment.
If you can predict how the currency pair will perform in the future, you can use that information to profit from similar price swings.
Use charts to automate your trades
Many automated Forex trading programs also suggest their trades by using these Forex charts. To identify a profitable investment opportunity, they combine historical data with real-time quotes.
These experts can also forecast when to exit positions for maximum profits. By doing this manually, investors profit from the trades too soon, leaving them to profit that an automated system would have recovered. Allowing these programs to make your trades could provide you with a profit if they find a good opportunity, enter the position, and exit again.
Bottom line
A Kenyan trader can’t trade according to his needs without understanding the chart and its pattern. Identifying the chart patterns gradually will assist one in understanding which actions to take based on the chart patterns.
Trading a pattern may make a trader feel comfortable when he sees the pattern in the end. Investors are accustomed to finding new patterns and focusing on their repeated patterns.
Lastly, an individual must study the charts deeply to execute successful trades. It’s very callous for rookies of Kenya to have a chart that leaves them vulnerable to severe losses. A good way to understand the graph is to read its patterns because sometimes the same pattern can repeat itself.
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Heinrich is a forex and CFD enthusiast with a passion for writing good informative quality content. He strives to showcase the best forex brokers in Africa. Join him on his Journey!
Content Writer | Market Analyst
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