The simplest way to explain what a forex chart is would be to say it’s a conglomeration of data that gives one the historical trend of the price and price mechanism. It presents the data in a pictorial form which makes it easy for the reader to assimilate the data. It is in x and y axis with the price represented in the y axis and the time in x axis.
Forex trading deals with currency the world over therefore it has forex charts that fluctuate and cover a large variety of currencies. The chart looks quite similar to that of the stock markets and not so difficult to comprehend once there is initial understanding of the same. A novice reader or trader of forex exchanges would also be able to understand the charts. It is best to select one specific currency pair and also a fixed time period to start one’s study of the chart. It would then make sense, particularly the graphical representation of the data collected in that period of time.
One must also bear in mind that the trading system in forex trade is also not one single fixed one. The chart therefore would vary depending on the forex trading system that has been adopted. There are line charts as also candle stick charts and OHLC charts. One must also bear the basic reading process of reading a pair from left to right.
To confirm the pattern and trends, each system has a different time frame that it employs. If for example a trader takes up one currency pair on the x axis, it would be said that the trade is going in the traders favour if the chart goes up in the y axis. The quoted currency it means is falling when compared to the base currency. For a trader who wants to dispose of the pair, the pair must show a falling characteristic.
These are some of the basic fundamentals of interpreting the forex chart.