What is Forex Charting Software
Forex charting software is an analytical, computer-based tool used to help currency traders with foreign exchange (FX) trading analysis by charting the price of a given currency pair along with various indicators. Many traders use forex charting software packages to determine the likely direction on a given currency pair.
BREAKING DOWN Forex Charting Software
Forex charting software offers a graphical display of movements in the value of currency pairs over a given period. Several different chart types are available to the user. The information can be as simple as a plot of prices, or it can include additional information helpful for technical analysis of currency pairs. This information helps a trader identify the most advantageous trading pairs and timeframes.
Many forex brokers offer some form of charting software to their traders using their services. Some online sites also provide a variety of charts, either for free or under a subscription service. Choosing the best software generally depends on a trader’s needs and experience. Considerations include the type of technical analysis they wish to undertake, the volume or duration of their trades, and the kind of device they want to to use to view the charts.
Wise traders will also make a note of the data source from which charting solutions pull their prices, ensuring that those sources are up to date, reliable, and accurate.
Forex Charting Software Displays
Forex charts generally display information as a line chart, bar chart, or candlestick chart depending on the data a trader desires. Most frequently, traders will use candlestick charting because it displays the broadest amount of information.
Simple charts plot specific price points over time.
Forex charting software typically shows closing prices, opening prices, high price, and low price points. Bar and candlestick charts display information on the opening and closing prices for a currency pair, as well as the high and low prices for the currency pair over that period.
Depending on the type of trends a trader hopes to spot, they may choose to display intervals ranges including by the minute, hourly, daily, weekly, monthly, yearly, and multi-yearly. Bar charts display information using a simple vertical line set against an x/y axis. The price displays as the y-axis with time represented on the x-axis. Horizontal tick marks extending to the left or right of the line show the opening and closing prices.
Candlestick charts present the same information with more visual variety. This type of chart uses two different colors to indicate the direction of change over time, one color for up and another for down. A thin line represents the range of prices offered throughout the day with a thicker bar filling the space between the open and close prices. Traders can determine whether the open price is higher than the close price based upon the color of the bar. Typically, lighter colors indicate a pair closed higher than it opened, while darker colors indicate a fall in price between the open and the close.