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 the chart prices.

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

Traders must therefore learn how to use charts before they can start trading 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 methods draws a continuous line which connects the closing prices. For illustration if a trader is using the 5 minutes chart then the line chart will draw a continuous line which connects and joins the closing price of the market after every five minutes.

Bar Chart - This chart uses bars to display the price moves, 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.

Candle Charts - These are the most popular chart types as they are the most visually appealing/identifiable & they represent the price moves 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 candle chart look like a candlestick and they have a body that resembles and looks like the wax part of a candlestick and an upper and a lower protruding line which resembles the wick of a candlestick.

XAU/USD Chart Periods - Chart Timeframes

A chart will draw and plot charts based on different time periods - these are 1 minute, 5 minutes, 15 minute, 1 hour, 4 hour, 1 day, 1week and 1 month. The period used to draw chart data is also known as a chart timeframe, for example the 5 min chart period is commonly referred to as the 5 min chart by trader. This 5 min time-frame will represent data for the five minutes of trading, after the 5 minutes a new set of information will be used to draw another representation on the chart. 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 information 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 information to make trade decisions.

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

How to Use Candlestick Charts

The candlestick charts uses candlestick which have different colour to represent different price moves, blue candles show prices closed higher than they opened, red candlesticks show prices closed lower than they opened. This color presentation is then used by Gold traders to determine when the price has headed up/down.

The candles 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 looks like the wick of a candle, the low price is represented by a poking line protruding downward and it also resembles a candlestick wick facing down.

Candles

A trader can also add a indicator on the chart so that they can interpret the chart market using these indicators. Traders will need to place and set indicators on the so that they can get additional information about a market trend & therefore be in a better position to make a more informed trading 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 like the MAs 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 display this direction. A upward 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 downward.

To learn how to draw a trend line and 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 website.

Learn More Lessons & Courses:

Forex Traders Seminar Gala

Forex Traders Seminar

Gold Broker