So, if you open a line chart and you want to see the price on a 1-hour timeframe, then you will see a line that connects the closing price every hour. The live bars chart shows not only the closing price but also the high and the low that the price reached on any given timeframe. So, if you open for example a 1-hour bars chart, you will see the open price of the bar the segment on the left , the closing price the segment on the right , the highest price reached in that timeframe which will be above the open price and the lowest price reached in that timeframe which will be below the open price.
If the bar closes above the open price, then you will see it as green and if it closes below the open price, you will see it as red. Note that you can choose any colour you want for your charts, but the green and red are generally the most used ones because they visually show if the bar closed positive compared to the open price green or negative red. The candlesticks live chart is the most popular one and you will see it everywhere in the financial world.
You have the body of the candlestick that shows the open and the closing price and the wicks showing the highest and the lowest price reached on the timeframe you selected. As previously mentioned, you can use any colour you prefer for the candlesticks. The last thing you need to know about charts is that they are plotted on two axes. The horizontal axis shows you the time and the vertical axis shows you the price.
The price always goes to the right, and you look left when you want to see past price data. What time frames should I use on my live charts? When you open a price chart there are multiple timeframes you can choose from that range from 1 minute to even monthly. The most popular timeframes are the 5 minutes, the 15 minutes, the 1 hour, the 4 hour, the daily, the weekly and the monthly.
What timeframe to use depends on you and on the type of trading opportunities you want to take. Generally, the lower time frames are noisier because you will see the price react to different daily drivers like news, rumours, economic data, central bank speeches, reports, geopolitical developments and so on. Most of those drivers may not be important for the market in the bigger picture, but in the short term they may cause the price to spike here and there. On the other hand, the higher time frames are less prone to such noisy price action because it takes more time for a candlestick to close.
How to use a chart to identify a trend? In technical analysis a trend is identified by a series of swing highs and swing lows. In an uptrend the price makes higher highs swing high and higher lows swing low while in a downtrend the price prints lower lows swing low and lower highs swing high. It may look easy from the chart above but not only the swing highs and swing lows can be subjective, but you can also find different trends on different timeframes.
For example, you may have an uptrend on a 5 minutes chart but a downtrend on a 1 hour chart. Generally, the higher timeframe is regarded as stronger than the lower one. So, if you have a downtrend on a 1 hour chart and an uptrend on a 5 minutes chart, technical analysts will look at signs of the uptrend on a 5 minutes chart fading before calling a resumption of the higher timeframe downtrend.
Another way technical analysts identify trends on charts is via moving averages. A moving average is a technical indicator that smooths out the price action and plots a constantly updated average price with a line. If for example you want to use a 50 period moving average, then the indicator will take the previous 50 closing prices and divide by 50 to get the average price. The most popular moving averages are the EMA20 exponential moving average of the last 20 bars , followed by SMA Simple moving average of 20, 50, the and period moving averages.
So, you can either just look at the swing highs and swing lows by eye, use the moving averages or combine both methods to better identify different trends. How to use indicators? Indicators can help technical analysts to better navigate the noise in the markets. Indicators should not be used on their own but as an extra confluence to the overall analysis. They serve different purposes, but the ultimate goal is to better make sense of the price action.
Moving averages are used to identify trends and to provide dynamic support and resistance for the price. For example, if the price is above a moving average, then it is said to be in an uptrend and generally the technical analyst will look at possible points on the chart where the price may pullback to and then bounce off of.
Oscillators are used to identify momentum and possible turning points. The RSI is measured on a scale from 0 to and a default period of 14 most recent closing prices. Traders often use it as a primary indicator to create a trading strategy. On the other hand, you can use this indicator to find a possible market reversal point or a continuation point.
Therefore, you can enter the trade according to a trading strategy based on other mt4 indicators. Bollinger Bands John Bollinger created the Bollinger Bands indicator which is one of the forex indicators. The main element of Bollinger bands is moving averages. There are two standard deviations in upside and the downside and a classical moving average in the middle.
Overall, this trading indicator is very easy to use and provides a reliable trading entry. The upper and lower line in Bollinger bands indicator works as dynamic support and resistance levels. Any rejection from these levels indicates a possible entry.
Furthermore, any breakout from these levels also provides profitable trades. However, a candle close below or above the middle line creates the possibility of testing the next level. Stochastic Stochastic is a popular momentum indicator that was developed in the early s. The main aim of this indicator is to identify the overbought and oversold zone. Traders often need to find a possible profit-taking area in their trading strategy. Therefore, they use this forex indicator to find the location from where the price is expected to reverse.
The Stochastic indicator moves from 0 levels to levels. If the price moves above the 70 levels, the price will likely reverse. On the other hand, if the price moves below the 30 levels, it creates the possibility of a bullish reversal.
Ichimoku Kinko Hyo Ichimoku Kinko Hyo or the Ichimoku Cloud is one of the forex indicators with elements to create a complete trading strategy. Several elements in this indicator help traders to identify every aspect of the market. The Kumo Cloud is the first element of this indicator that helps to understand the market context. If the price is trading below the Kumo Cloud, the overall trend is bearish, and above the Kumo Cloud is bullish.
On the other hand, Tenkan Sen and Kijun Sen are two important elements of this indicator that made with the concept of moving average. These two lines move with the price, and any rejection from these creates a trading entry. Fibonacci Fibonacci is a trading tool that shows the most accurate market direction as it is related to every creature in the universe.
The most significant part of the Fibonacci tool is the golden ratio of 1. In the forex market, traders use this ratio to identify market reversal and the profit-taking area. Suggested Read — Fibonacci Retracement — How to use it while trading stocks If the price moves with a trend, corrects towards Furthermore, based on the market behaviour and momentum there are other Fibonacci levels like In the forex market, measuring the volatility is very important as it is related to direct market movement.
In every financial market, the increase of volatility indicates the market reversal, and the decrease of volatility indicates the market continuation. Therefore, if the volatility is low, you can extend your take profit.
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Charts visually display past and current price data.
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