Currency Charts, Currency Graphs

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Currency charts (or forex charts) depict the behavior of various currency pairs. Typical currency charts include intraday charts, that plot minute-by-minute changes; daily charts, that show closing values at the end of each trading day; and long term charts that showly weekly or monthly closing values.

Types of Currency Charts

Currency charts are prepared in a number of ways, including:

  • Line chart: It exhibits the exchange rates of a currency over a specific period through lines created by connecting data points.

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  • Point and figure chart: Changes in the prices of currencies are represented by Xs and Os, which illustrate a rise and decline in prices, respectively.

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  • Bar chart: The performance of currencies is represented by bars at specific time intervals.

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  • Candlestick chart: Candlestick charting consists of black and white bodies. The candlesticks have “wicks” on both ends to represent the daily highs and lows of a currency. A white candlestick indicates a higher intra-day closing price (gains) and a black candlestick represents a lower closing price (losses).

    • Correlation currency charts have also proved highly useful. “Correlation” indicates the strength and direction of a linearrelationship between two variables. It has been observed that some currency pairs tend to move in the same direction, while others tend to move in opposite directions.

    The Use of Currency Charts

    Currency charts are used for gathering and analyzing data of various currency pairs from across the world. These charts are used extensively by day traders and investors to analyze trends and predict the direction of the market.

    Correlation currency charts help investors understand how diversified their forex portfolio is and what their risk profile islike. These charts also prove useful in hedging trades.

    Benefits of Currency Charts

    Currency charts:

    • Are easy to use and interpret.

    • Reflect a slower-moving and stable economy.

    • Diverge from tight trading ranges and have the tendency to develop strong trends.

    • Are generally predictable, despite the volatile nature of the forex market.

    • Help in efficient and fast analysis as only a few major currencies need to be tracked as a base for a wide range of stocks.

    Which Currency Chart to Refer?

    Forex trading involves short-term day traders and long-term speculators. This distinction determines the chart that one needs to consider for making trade decisions.

    Trading off long-term trends requires referring to charts with a longer timeframe (weeks, months or years). On the other hand, for short-term trading, hourly charts are better suited.

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