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The diagrams as well as charts in the market depend entirely on the various actions that are related with the market. Foreign exchange is a field that depends heavily on charts. These charts help in analysing the conditions that exist in the market and also assess the market conditions and forecasts are made depending on the chart. These charts even help in identification of the various behaviour patterns that exist in the field of foreign exchange. Most of the charts that are part of the market help in depicting the trend related with the exchange rate of the currencies of forex market. In these charts, the rates are shown in the vertical axis while time is projected in the horizontal axis. Charts are common tools that can be used for technical as well as fundamental analysis. In technical analysis is the kind of analysis which is used for analysing the micro movements. This analysis is helpful in matching the actual occurrence and the patterns. Fundamental analysis is helpful in finding the relationship between trend depicted on chart and the macro events that occur simultaneously with the trends on chart.
Time Scale on Chart Related with Foreign Exchange
The time scale that is chosen by a trader depends on the strategy with which a trader approaches the market of foreign exchange. An investor of short range chooses a day as the time scale. The medium range investor chooses the time scale of week while a long range investor chooses a month as time scale. When the time scale chosen becomes very low, the chart becomes noisy that is you won’t be able to view the trend that exists in the whole market. The various types of charts include bar charts, candlestick charts and bar charts.
This is the simplest type of chart that exists in the market. This chart makes use of closing prices of currencies and thus forms homogeneous line joining the closing prices. A line chart helps in setting up resistance level and also support level.
Figure and Point Charts
These are charts that completely depend on price but not using time. These kinds of charts do not have time as a linear representation. These charts help only in showing the trend that is associated with the price of currency of the field of foreign exchange. The point charts represents the increases in the form of rising Xs and the decreases are represented in the form of Os that form a declining stack. This chart helps in filtering price movements that are not important. This chart helps in determining critical resistance and support levels easily than any other kind of charts. Traders place orders once the price levels reaches the particular levels of support and resistance.
Bar chart is another pictorial representation that indicates three rates for every time unit chosen. This chart helps in indicating the range of trading prices at a particular time period.
These kinds of charts help in depicting the closing price, high and low values of prices in the shape of candles.