Fundamental, technical, quantitative... There are a number of methods used by forex traders to predict the movements of currency pairs. Some traders focus on news, interest rates and economic variables while others prefer to use charting tools and indicators to guide their trading decisions.
However, no matter your trading method, you'll need to know how to read a forex chart - there's no escaping it. Luckily, we created this detailed guide to help you get started.
You must crawl before you can walk. And forex charting is no different – you first need to have a good understanding of the basics, before you can progress to advanced stuff.
What is Forex?
Forex is short for ‘foreign exchange’ – the game of buying and selling various currencies in the foreign exchange market.
In the global foreign exchange market, retailers, investors, speculators and institutions determine the relative value for the conversion of one currency to another via the buying a selling of currency pairs.
It’s a dynamic, liquid marketplace with daily turnover predicted to be in excess of 5.3 trillion dollars.
How to Read a Currency Quote?
Forex is the business of conversion, and since you are always comparing the value of one currency to another, forex is always quoted in pairs.
For example, the quote of EUR/USD shows how many US dollars you will get for one Euro.
The first currency is called the base; the second is called the quote. When you buy a currency pair, you buy the base currency, and sell the quote currency. Simple.
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What is a Pip?
The most popular piece of terminology used by forex traders has got to be the humble ‘pip’.
A pip is simply a unit you count profit or loss in.
Typically, forex pairs are quoted to four decimal places (0.0001). The ‘1’, four spaces after the 0, is what is referred to as a pip.