Now that you have some experience and understanding in currency trading, we will starting discussing a few basic tools that forex traders frequently use.

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Due to the fast paced nature and leverage available in forex trading, many forex traders do not hold positions for very long. For example, forex day traders may initiate a large number of trades in a single day, and may not hold them any longer than a few minutes each. When dealing with such small time horizons , viewing a chart and using technical analysis are efficient tools, because a chart and associated patterns can indicate a wealth of information in a small amount of time.

In this section, we will discuss the "candlestick chart" and the importance of identifying trends. In the next lesson, we'll get into a common chart pattern called the "head and shoulders. Candlestick Charts While everyone is used to seeing the conventional line charts found in everyday life, the candlestick chart is a chart variant that has been used for around years and discloses more information than your conventional line chart. The candlestick is a thin vertical line showing the period's trading range.

A wide bar on the vertical line illustrates the difference between the open and close. The daily candlestick line contains the currency's value at open , high , low and close of a specific day.

The candlestick has a wide part, which is called the "real body". This real body represents the range between the open and close of that day's trading. When the real body is filled in or black, it means the close was lower than the open.

If the real body is empty, it means the opposite: Just above and below the real body are the " shadows. When the upper shadow the top wick on a down day is short, the open that day was closer to the high of the day. And a short upper shadow on an up day dictates that the close was near the high.

The relationship between the day's open, high, low and close determine the look of the daily candlestick. After viewing it, it is easy to see the wealth of information displayed on each candlestick. At just a glance, you can see where a currency's opening and closing rates, its high and low, and also whether it closed higher than it opened.

When you see a series of candlesticks, you are able to see another important concept of charting: For a more in depth analysis, check out The Art of Candlestick Charting. Dictionary Term Of The Day. A measure of what it costs an investment company to operate a mutual fund.

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These methods both have their merits, but they may be strongest when combined. Crowd psychology is the reason this technique works. Find out how to make it work for you. These five popular candlestick chart patterns signal a bullish reversal in downtrend. A hanging man is a candlestick pattern that hints at the reversal of an uptrend.

How to Read Forex Charts: What Beginners Need To Know

The candlestick is recognizable by a small box atop a long, narrow "shadow. Statistics show unusual accuracy for the buy and sell signals of certain candlestick patterns.

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How To Read Forex Charts: 5 Things You Must Know

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