What Is Forex Charting Software?
Forex charting software is an analytical, computer-based visualization toolkit used to help currency traders with foreign exchange (FX) trading analysis. These software tools produce interactive price charts for various currency pairs along with various technical indicators and overlays.
Many traders use forex charting software packages to determine the likely direction on a given currency pair in conjunction with other technologies such as predictive forecasting software and online trading to get an edge in forex markets.
- Forex charting software provides FX traders with an interactive graphical interface to help with technical analysis and timing trades.
- A forex chart graphically depicts the historical behavior of a currency paid across various time frames, along with technical patterns & indicators and overlays.
- Forex charting software can be a powerful tool that users can customize and trade directly from in electronic forex markets.
Understanding Forex Charting Software
Forex charting software offers users a graphical interface displaying movements in the value of currency pairs over a given period. Several different chart types are available to the user such as bar charts, line charts, and candlesticks, among others. This information can be as simple as a basic plot of historical prices, or it can include reams of additional information helpful for technical analysis of currency pairs. This data helps a trader identify the most advantageous trading pairs and timeframes along with entry and exit points.
Many forex brokers now offer some form of charting software to the traders who use their platform, either for free or under a subscription service. Choosing the best charting software generally depends on a trader’s personal 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. Knowledgeable traders will make note of the data sources from which charting solutions pull their prices and other information, 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 trader's preferences or needs. 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. Often, traders will rely on candlestick charting because it displays a greater amount of information.
Depending on the indicators and patterns an FX trader hopes to spot, they may choose to display interval ranges by the minute or hour, while others prfer daily, weekly, monthly, or even yearly or multi-year intervals.
Basic Chart Types
A line chart is a graphical representation of an asset's historical price action that connects a series of data points with a continuous line. This is the most basic type of chart used in finance and typically only depicts a security's closing prices over time. Line charts can be used on any time frame, but most often using day-to-day price changes.
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.