Get acquainted with the 3 most popular charts you will encounter in forex.
Line Chart
The line chart is the most basic chart type and is created by connecting several data points together with a line. The line chart can give you a good idea of how currency price changes over a given frame and allows you to keep an accurate track record of historical closing prices.
Bar chart
Japanese candlesticks charts
To better understand charts, get acquainted with the price symbolic movers. While most people are familiar with Wall Street’s raging bull symbolizing aggressive financial optimism and prosperity, few understand the bear representing pessimism and declining the markets.
BULL
A bullish or bull market describes a rising markets that shows confidence and stability. Typically employment is high and the economy is strong, convincing brokers and investors of an upward market trend. The term comes from the bull fights when an opponent is thrown up into the air with bull’s horn.
When bulls outweigh bears, indicators turn to the color green, representing a larger demand for currency and thus increasing its value.
So when you spot a bullish market, you want to buy currencies for less and sell for a higher currency price.
BEAR
On the other side of the spectrum is a bearish or bear market. The declining market creates insecurity among brokers and investors who expect trends to go downward. The term is used to signify that the market behaves the same way as a bear in fight by pushing down to the ground. A bearish market is visualized in charts with the color red.
When you feel confident that the bear will soon overtake the bull and expect currency rates to fall, you would sell short. This process may seem unclear for many people, so let’s break it down. The simplified idea is that you borrow currency from your broker and when the currency price falls, you pay back the broker at lower price, thus making a profit on the difference. The process is completely automated. I recommend trying the Sell-Short option in trading.
