Beginners in the forex usually will definitely be confused when the first time to see the MetaTrader 4 (MT4) display, they will wonder how to read a chart?
This is because there is a lot of information displayed on this platform.
The “Market Watch”, “Navigator” screen, until the table that goes up and down in the middle of the screen might make your brow frown when you first see it.
Graphs in MT4 are generally used by traders to read price movements from time to time easily.
With the help of graphics, you can easily determine the trends and look for patterns that can make you get big profits.
There are three types of charts in MT4, namely line charts, bar charts, and candlestick charts.
TenkoFX is a broker that uses MetaTrader 4 to serve forex traders, this platform displays a selection of charts, both bar charts, line charts, and candlestick charts.
Most traders choose to read charts with candlestick chart options because it is easier to understand the details of prices on candlesticks, from open, high, low can close prices to easily read.
The line chart is the simplest graphical display in MT4. This graph illustrates the line connecting closing prices. For example: in the last hour, currency trading was closed at 200, 100, 150, 300.
These prices are then connected in a straight line and become a line chart.
This graph we can see price movements in general in a certain period of time.
Because the shape is simple, it only shows the line from the Close price to the next Close price, so that the beginner trader will find it difficult to read the chart in the form of a line because the information provided is too limited.
Unlike the line graph which only contains closing price information, the Chart Bar shows Open High Low Close from price changes more clearly because traders can see the opening, closing, high and lowest prices at a certain time period.
The lower end of this graph shows the lowest price that has ever been traded in a certain time period. Conversely, the upper end is the highest price.
The perpendicular line indicates the price range that occurs within that time period.
The horizontal line in this graph (it might be difficult to see if the chart is not zooming) the line on the left is the opening price while the right one is the closing price.
In the picture above we can see the conditions in which prices are opened at a lower or higher price.
Simply put, 1 bar signifies a certain period of timeframe, it can be 1 minute, 1 hour, one day, week or one month, depending on the time period you have set on your MT4 chart.
This chart provides Open High Low Close of price information such as the Bar chart, but with a more attractive appearance.
Here, Bearish and Bullish price differences become clearer than the Bar chart because Candlesticks usually be distinguished from certain colors.
For example, if the Open price is higher than the Close price, which indicates a decline (Bearish), then usually the Candlestick will be black.
Conversely, if the price of the Open price is lower than Close (Bullish), then the Candlestick is white.
You can modify the chart color appearance for bullish and bearish through your Metatrader platform, but make sure the bullish and bearish colors are different to make it easier for you to know prices are going up or down.
From the three charts, Candlestick Chart is the one most often used by forex traders.
Important Keys to Reading the Charts.
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How to read the chart there are basic guidelines for reading charts that you need to understand.
Find Out Current Trends.
Adjust the pattern of price movements with the type of order that you will do.
If you will to buy, focus on the currency pair whose graph is an uptrend.
Conversely, if you want to sell, look for a currency whose graph is downtrend.
Uptrends are marked with a base currency value that is stronger against the quote currency.
Make sure before open new entries, you have identified the uptrend through fundamental analysis or technical analysis.
If using fundamental analysis, make sure how much influence the news has on strengthening or weakening the value of the currency.
If using technical analysis, use the default indicator of the trading platform to identify the strengthening or weakening of the selected pair.
You can use Free forex best indicators as help tool your trading journey.
Check Time Frame.
Observation of the movement of a pair in forex trading is also influenced by the Time Frame that you use.
Time frame is a certain period of time determined as a period of observation of price movements.
In MetaTrader, time frame units that can be selected include: 1 Minute (M1), 5 Minutes (M5), 15 Minutes (M15), 30 Minutes (M30), 1 Hour (H1), 4 Hours (H4), 1 Day (D1), 1 Week (W1), and 1 Month (MN).
Sometimes each time frame can cause different interpretations of the same pair of movements at the same time, so you need to figure out timeframe as trigger your analysis.
Know the Costs of Spreads.
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The next important key to reading the chart is to pay attention to spreads. Spreads are the difference between the selling price (bid) and the buying value (ask), or Sell quotes and Buy quotes.
This is a determining factor, whether Take Profit can be executed correctly or not. Therefore, when open Buy, make sure the price is in the bid area, on the contrary when open sell, the price is around the Ask area.
Customize Charts with Your Local Time.
Pay attention to the time zone displayed at the bottom of the Forex chart. Usually, forex charts are arranged based on certain time zones, such as GMT time, New York time, or other time zones.
The problem that often occurs in reading forex charts is how to distinguish your local time from server time when following news announcements.
To avoid missing out on news and confusion about time zones, you can outsmart it by converting the announcement time to local time, so that the timing of the announcement will be more easily adjusted to your trading preparation.
Make sure your internet is connected.
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The final step is to check your forex chart, whether the candle displayed is in accordance with the current market conditions or not.
Usually, charts, if not connected to the internet, will stagnate, and traders if they don’t realize it, hence will often mistakenly analyze prices.
If the trader just realized after the actual price has moved away, then this certainly can be detrimental from all sides.
So, don’t forget to always check your internet network first. Although it looks trivial, this problem can cause harm. Especially if you are trading in a large number of lots.
Reading charts is an important part of market analysis, by understanding how to read charts, a trader will get a clearer picture of how to trade.
By understanding some basic guidelines for reading charts from the description above, it is expected that traders will be able to make profitable trades.
For the next stage, please install the indicator that matches your preferences to obtain additional information from the chart you are using.