Trade Gold Trading

How Do I Read a Chart

In trading the market the chart is the basic tool used by all traders. The chart will show info about a trading instrument - the chart will show the general direction of prices, the chart will also show the current price of gold & the chart will also explain the historical movement of chart prices.

Traders will use these trading charts to determine where to open trade positions. From the chart the trader will analyze the market movements using technical indicators so as to determine the direction of the market and determine the trade to open.

Traders must therefore learn how to use charts before they can start transacting in the online trading market.

The following are the different things which a gold trader will need to know about charts.

Types of Charts

There are three types of charts

Line Chart - this charting method draws a continuous line which connects the closing prices. For example if a trader is using the 5 minutes chart then this line chart will draw a continuous line which connects closing price of the market after every five minutes.

Bar Chart - This chart use bars to illustrate price movements, and plots O H C L - Opening price, High, Low, & Closing price for that period, for example if the period used is 5 minutes, the bar will represent the price data and the O-H-C-L points for the 5 minutes.

Candlestick Charts - The are the most popular chart types as they are the most visually appealing & they represent the price movements in an easily identifiable way which clearly show when a market moves up or when it moves down using different colors to differentiate the direction. These candlestick chart look like a candlestick & they have a body that resembles the wax part of a candlestick & an upper & a lower poking line that resembles the wick of a candle.

XAUUSD Chart Periods - Chart Timeframes

A chart will draw charts based on different time periods - these are 1 minute, 5 minutes, 15 minute, 1 hour, 4 hour, 1 day, 1week & 1 month. The period used to draw chart data is also known as a chart time frame, for example the 5 min chart period is commonly referred to as the 5 min chart by trader. This 5 min timeframe will represent data for the five minutes of trading, after those five minutes another set of info will be used to draw another chart representation. For examples if a trader is using candlesticks chart, the data of one candle-stick will draw information of that five minutes, after those five minute another candlestick will be drawn using price info of the next five minutes - when these candles are combined they then make a graph representation that shows the overall direction of market prices commonly referred to as the trend. Traders then can use this info to make trade decisions.

Because the most oftenly used charts are candles charts we shall discuss how to read charts specifically candlestick charts.

How to Use Candle Charts

The candle charts uses candle that have different colour to represent different price moves, blue candlesticks show prices closed higher than they opened, red candle-sticks show prices closed lower than they opened. This color representation is then used by traders to determine when the price has headed up/down.

The candlesticks also show OHCL:

O - Opening Price

H - Highest Price

C - Closing Price

L - Lowest Price

These price points are represented using a formation which looks like a candle, the distance between the opening price & closing price is represented by what is referred to as the body, this part resembles the wax part of a candlestick. High price is represented by a poking line protruding upwards, this line resembles the wick of a candle, the low price is represented by a poking line protruding downward and it also resembles a candle wick facing down.

Candles

A trader can also add a indicator on the chart so that they can interpret the trading chart market using these technical indicators. Traders will need to place indicators on the trading so that they can get additional information about a market trend & therefore be in a better position to make a more informed decision. These indicators can be used to predict the likely market direction that the market is likely to keep moving in whether up or down.

A trader can use indicators such as the moving averages and Bollinger to determine the trend. Traders also can use other indicators such as the RSI and stochastic oscillators indicators to determine when to open trade positions.

Trend lines are also used to determine the direction of the candle charts trends and these lines can drawn on the trading charts to illustrate this direction. A up-wards trend will be pictured by a trend line is moving up while a trend that is moving down will b e shown a trend-line that's moving downwards.

To learn how to draw a trend line & how to trade using technical analysis a trader can learn about the trend line lesson under the learn lessons section of this site, for indicators a trader can learn about indicators and their trading analysis on the technical indicators section of this site.

Learn More Lessons & Courses:

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Forex Traders Seminar

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