Most chart s present t he behavior of currency exchange rat es over t ime. Rat es (prices) are measured on t he vert ical axis and t ime is shown of t he horizont al axis.
Chart s are used by bot h t echnical and fundament al analyst s. The t echnical analyst analyzes t he “ micro” movement s, t rying t o mat ch t he act ual occurrence wit h known pat t erns. The fundament al analyst t ries t o f ind correlat ion bet ween t he t rend seen on t he chart and “ macro” event s occurring parallel t o t hat (polit ical and ot hers).
What is an appropriat e t ime scale t o use on a chart ?
It depends on t he t rader’ s st rat egy. The short -range invest or would probably select a day chart (unit s of hours, minut es), where t he medium and long- range invest or would use t he weekly or mont hly chart s. High resolut ion chart s (e. g. – minut es and seconds) may show “ noise” , meaning t hat wit h f ine det ails in view, it is somet imes harder t o see t he overall t rend.
The maj or t ypes of chart s:
Poi nt and f i gur e char t s - chart s based on price wit hout t ime. Unlike most ot her invest ment chart s, point and f igure chart s do not present a l inear represent at ion of t ime. Inst ead, t hey show t rends in price.
Increases are represent ed by a rising st ack of Xs, and decreases are represent ed by a declining st ack of Os. This t ype of chart is used t o f il t er out non-significant price movement s, and enables t he t rader t o easily det ermine crit ical support and resist ance levels. Traders will place orders when t he price moves beyond ident if ied support / resist ance levels.
Increases are represent ed by a rising st ack of Xs, and decreases are represent ed by a declining st ack of Os. This t ype of chart is used t o f il t er out non-significant price movement s, and enables t he t rader t o easily det ermine crit ical support and resist ance levels. Traders will place orders when t he price moves beyond ident if ied support / resist ance levels.
Candl est i ck char t
This kind of chart is based on an ancient Japanese met hod. The chart represent s prices at t heir opening, high, low and closing rat es, in a form of candles, f or each t ime unit select ed.
The empt y (t ransparent ) candles show increase, while t he dark (full) ones show decrease.
The lengt h of t he body shows t he range bet ween opening and closing, while t he whole candle (including t op and bot t om wicks) show t he whole range of t rading prices for t he select ed t ime unit .
