How to Read a Forex Chart

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Re: How to Read a Forex Chart

Post  vietnamvodoi on Sat Oct 16, 2010 3:20 pm

So how does the actual trading work? A complete transaction is the buying of one currency and selling of another at the same time. We will be focusing on spot transactions in these lessons and other forms of Forex transaction (i.e. futures, options) will not be covered. The technical definition for a spot contract is a transaction at the current market rate with a settlement that takes place within two business days. However, in a practical sense, when trading Forex, a position is opened at the current rate and can then be closed any time afterwards, at that next moment's rate. Positions that are not closed within the two business days are automatically "rolled over", meaning the Forex dealer with which the position is open will keep automatically renewing your spot contract for you until it is closed.

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How to Read a Forex Chart

Post  akaishuu on Fri Oct 15, 2010 3:35 pm

How to Read a Forex Chart

www.cmsfx.comThe current exchange rate is shown as a brown line with the pair’s price in a brown box. In the above chart, the current rate (120.93) for the USD/JPY pair is the amount of Yen it takes to exchange for 1 Dollar. Forex notation is a little awkward as the rate is equivalent to how much of the counter currency (second in the pair) is required to exchange for 1 unit of the base currency (first in the pair). Therefore, the notation is upside down from the normal logic of using a fraction. When the value of the base currency, here the Dollar, is rising, the rate will be moving upwards (seen as blue candles). If the rate changes from 120.93 to 121.50, it will take more Yen to buy the same amount of Dollars. When the situation is reversed, the Japanese currency is doing better and the pair's price will fall (seen as red candles). It will take less Yen to buy the same amount of Dollars.

Let’s say the trader buys the Dollar while selling Yen at the current rate of 120.93. The trader is therefore buying or longing the USD/JPY pair. If the trader was to sell the Dollar and buy Yen then he or she would be selling (shorting) the pair. This system of terminology is used in order to avoid confusion about which pair is being bought or sold. By taking a long position on the pair, the trader will wish to sell the Dollar back versus the Yen at a higher price, say 121.50, a change of 57 "points".
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