Forex Chart Analysis: The Most Imporant tool of trading

The whole forex trading process is based on price movement predictions using different tools. Forex chart analysis is the most important tool for traders. So it is essential to learn how to analyze these live indicators and patterns in the best way. 

Forex Chart Analysis

What are Charts in Forex?

Charts are important technical analysis tools of financial trading that define price movement over time. It helps the trader to predict the changes and make effective decisions accordingly.

Forex charts represent the visual price movement that helps traders invest in the right currency pair at the right time. These charts contain important information such as entry, exit, stop loss and take profit points. 

Forex chart analysis is a method to read these patterns accurately and interpret the market movement. The main aim of charting forex is to identify patterns, trends, support, resistance levels, and other pivot points.

A quick glance

Charts are important technical analysis tools that define price movement over time. It helps the trader to predict the changes and make effective decisions accordingly

  • Line chart 
  • Candlestick charts
  • Bar Charts

The price movement in the chart is represented in the form of candles. Every candle represents a time frame of trading. These candles consist of two shadows and a body.

  • Learning
  • Integrate it with other technical analysis tools
  • Select a chart based on a time frame
  • Integrate the chart with your trading plan
  • Practice Trade

Methods for Forex chart analysis

There are different types of charts used to trade in forex. Here are some popular chart patterns in forex with distinct features used to analyze the historical data and predict the current price movements.

Forex line chart: One of the most popular tools of Forex graph analysis is line charts. The best part about this chart is it is the simplest of all. So it is easy for beginners to grab the information.

Forex trading is a complex process; this chart only contains basic information. So as compared to other technical analysis tools, it is less informative.

However, various experienced traders prefer simple charting tools rather than complex tools. Overall, line charts are suitable for beginners. You can get general ideas and basic information which you need when you start trading. 

Candlestick charts:  One of the most successful chart patterns in modern times is the Candlestick chart. It contains significant information such as the trading range of currency pairs, bullish and bearish alerts, opening and closing prices, and support and resistance points. 

The price movement in the chart is represented in the form of candles. Every candle represents a time frame of trading. These candles consist of two shadows and a body.

Body: It indicates the opening and closing prices of the currency pair. Usually, green candles are bullish, and red is bearish. In some charts, the relationship is also indicated with black and white colors.

Shadows: It is also popularly known as wicks. Each candlestick has lower and upper wicks. These wicks help traders in predicting future price movements.

A long body with a small wick on top suggests bearish movement or going short. Meanwhile, a long body with a small wick on the bottom suggests a bullish movement or to go long. With the help of these candles, a trader can identify whether to go short or long.

How to analyze Forex charts

Types of Candlestick Charts

Here are some popular bearish and bullish candlestick chart patterns in forex trading. 

Doji Chart: Indicates Trend Reversals 

This type of live currency chart usually has a long wick and a small body. The pattern form when the opening and closing prices are equal.

Hammer: Indicates Potential bullish reversal 

This chart has a small body and a long wick. It does not have an upper wick. When the price opened, sellers pushed down the prices, and when buyers came into the market, they pushed the prices up and closed the trading session more than the opening price.

Morning star: Indicates Potential bullish reversal

It has three candles; the first bearish candle shows a downtrend, followed by a bullish or bearish candle indicating indecision. The third bullish candles suggest that a reversal will occur. 

Evening star: Indicates Bearish reversal. 

Like the morning star, it also has three candles but indicates the opposite condition. Under this bullish candlestick, followed by a bullish or bearish candle. The third long bearish candles suggest that bearish reversal will occur.

Bullish Engulfing: Indicates a Bullish reversal. 

It is a popular live currency chart pattern and has two candles. The first bearish candle indicates a continuation of downtrends. The second bullish candle engulfed the first candle and suggested that bulls were back.

Bearish engulfing: Indicates a bearish reversal. 

The first bearish bullish indicates a continuation of uptrends. The second bearish candle engulfed the first candle and suggested that the bears were back.

Hanging man: Indicates bearish reversal. 

The shape of a hanging man is similar to a hammer and, however, indicates the opposite of it. The pattern suggests that the bulls attempted to push the price higher, but the bears entered the market and pushed the price down.

Spinning Top: Indicates indecision in the market

Spinning top forms when buyers and sellers don’t have control of the market. The price opened and closed at the same level, and both parties pushed prices downward and upwards.

Bar Charts: It is another popular and best forex chart veteran traders use. The chart uses a bar to display the price movement of the currency pairs. These bars represent the time frame of trades.

The bar indicates four pricing details: opening, closing, and high and low prices; Each bar consists of four prices – the opening price, the high price, the low price, and the closing price. 

This forex live chart indicator usually uses green, and red, or white and black colors suggesting bullish and bearish movements.

  • Vertical line: These lines represent high and low prices.
  • Horizontal line: These lines represent opening and closing prices
  • Bullish Bar:  The closing price is higher than the opening price. It indicates the price of the currency has gone up.
  • Bearish Bar: The closing price is lower than the opening price. It indicates the price of the currency has gone down.

How to analyze Forex charts

Here is a step-by-step procedure of Forex Chart Analysis which will help you to predict the market better and maximize the profits.   

Learning: The first and foremost step to start anything is to educate yourself about it. We have above studied the different types of chart with their distinctive features. 

Before using these technical tools, it is important to understand these patterns and select the best type suitable for your trading and matching your needs. 

If you are a beginner, use a simple chart, as it will increase the difficulties. Start with the simplest line chart, and when you master it, move to other complex patterns.

Integrate it with other technical analysis tools: Charts are among the most popular tools. However, do not rely solely on these charts.

Use other indicators such as moving average, relative strength index, Bollinger bands, oscillators and Fibonacci to verify the trends and interpretation of these charts.

Select chart based on time frame:  As we have studied above, the charts show results based on time frames, which could be in seconds, hours and months. 

Traders first need to identify the time frame they want to trade and then select the chart of that particular time frame. Suppose you are trading in gold and USD.

For XAU/USD chart analysis, you must first analyze multiple time frames to identify short-term and long-term trading opportunities. 

Integrate the chart with your trading plan:  A trading plan is necessary to trade effectively. Integrate the entry, exit, stop loss, take profit and other indicators with your strategy. 

Use support and resistance levels to manage your risk. The accuracy of charts is also important; otherwise, the whole result gets affected. So, check the success rate of the platform from where you are getting these tools. 

Practice Trade: Now start using chart patterns in forex trading, but first start with a demo account. Evaluate your results from trading using the chart. Once you have mastered the art. You can start training with a real account using these technical analysis indicators. 


Forex trading is affected by many technical and fundamental factors. You have to monitor all these factors to place and monitor the trade. 

Forex chart analysis provides you with key details such as exit, entry, stop loss take profit, support and resistance points. Your success greatly depends on this analysis.

So it is essential to select a chart with good accuracy and check the results with multiple other patterns. These charts are formed based on historical price changes. 

It is possible that due to sudden news or other fundamentals, the interpretation may change. So watch these factors before placing the trades. 


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