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4 How to Analyze and Interpret Trends in Forex Charts
Read Trends Like a Pro for Smart Forex Investment
Investors buy, sell, and exchange real-world currencies through the foreign exchange market (forex or FX). It is substantially distinct from other markets:
If you’ve invested in forex, you’re looking for these trends. They’re among the most critical factors determining when you buy or sell.
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It’s the largest financial market in the world.
• Uptrend: Prices trend toward a higher price, like climbing a mountain. This is the time to buy. • Downtrend: Prices drop downward, like skiing the aforementioned mountain. This is the time to sell.
• It determines the exchange rate for currencies around the world. • It’s open 24/7, so trading can happen at any time of the day. • Currencies are always traded in pairs, one country’s money for another. • Currencies are a lot less volatile than other markets. Some currencies, like the U.S. dollar or Japanese yen, are “free-floating,” which means their relative value is determined by free-market forces, such as supply-demand relationships. Other countries, such as Saudi Arabia and Panama, are “fixed float,” meaning a country’s governing body sets its currency’s value relative to other currencies. There are several advantages to trading on FX, including fewer rules, no central body oversight, and no fees or commissions. There are also disadvantages, like being unregulated, relying on the currency’s appreciation, and traders not having complete control over their trades. Information is an essential ingredient to achieving a profit. Investors must have data to speculate successfully, so they must read charts. The shifting trends value is constant; charts help investors visualize them to make the right decisions.
While many websites offer online charts, developing this analytical skill gives you a deeper understanding of the market.
1. Open up a candle chart and look at the currency’s current value. Candle charts depict price as a line with peaks and valleys. 2. Follow the line backward and find two recent highs and
lows. Prices are constantly changing, but you must determine the overall direction of the currency’s value.
3. Figure out if these points are going upward or
downward. This determines the timing of your trades.
Once you plot the chart, you can see where the currency’s value is going and invest accordingly. The forex market is full of opportunities. Solid chart analysis skills are necessary to take advantage of them and make a profit.
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