How to learn to read a chart? Basic principles and concepts

How to learn to read a chart? Basic principles and concepts

Being able to read a chart is the very first thing you need to be able to do so that when you open any asset, you can easily understand what state the market is in right now.

Where to begin?

  1. Study the terminology so that each time you do not get distracted by what a word means;
  2. Master the trading platform. Understand where the indicators are, how the account is opened, where are the different trading instruments, etc.
  3. Further, it is already possible to proceed directly to reading the charts.

What are charts?

Graphs reflect the change in the market prices of any asset. It is on them that you can see where the price is or was in the past.

With the help of history-based charts, relying on a certain regular price behavior, you can analyze the current state and predict further movement.

For beginners, you need to start learning with the market movement. The market is constantly in motion, it does not stand still, every second something somewhere is sold or bought.

The market always has only 2 states

1. Consolidation or Flat. The price is kept in a certain corridor, stands in the sideways. Most of the time the market is just in a flat state.

This is when there is a very weak movement in the market, assets are practically not sold or bought, or in very small quantities.

At this time, the market is more or less calm, more often this state of the market is called a flat. However, using a certain trading method, you can trade on it and earn income.

2. Trend movement or impulses. At this time, there are strong movements in the market. During strong trend movements, the speed of buying or selling can be very high. As professionals say, having chosen the right direction, during the trend, everyone earns, including beginners.

The price change in the market is expressed in points

A pip is the smallest unit on a chart. On binary options, just 1 pip is enough to close the deal with a profit and the trader can receive a guaranteed income.

In Forex trading, your earnings depend on the lot you choose, each asset has a different price for 1 lot, so before trading, you need to carefully familiarize yourself with the selected asset.

For example, on currency pairs 0.1 lot is 1$.

Graphs have three main types

1. Line chart. Just a line is displayed. It is very rarely used in analysis, as it does not allow you to accurately see the lows and highs of the price for a certain time.

2. Bar chart. Mainly used by professionals, mainly for VSA analysis and volume analysis. Complex type of charts, hardly suitable for beginners.

3. Candlestick chart. It reflects the price in candles. Candlesticks came to trading from Japan and are currently the most popular of all types for forecasting. Each candle has an opening price, a closing price, and it also has a body and a shadow.

The shadow of a candle shows the maximum or minimum market price that has occurred over a certain period of time.

Japanese candlestick analysis is probably used by 90% traders, it is just right for a beginner. Convenient and understandable chart, there are a lot of strategies based on candlesticks, as well as many candlestick patterns and different combinations. For example "absorption" - worked out in 99% with the correct interpretation.

There is also a Renko chart, but more on that in a separate article, as well as very little known and used ones: heikin ashi, line break and kagi.

So, after you learn how to understand the charts, then you need to choose for yourself a trading method with which you will earn.

For beginners, the choice of a trading strategy is a very important point. But you need to understand that not every strategy is suitable for you personally. It is recommended to try any strategy first on a demo account, and only then on a real one. If it doesn't work out, take the next strategy, and so on, until it works out.

You must understand exactly the rules of the strategy you are trading with, otherwise everything can end very badly for your deposit.

You should also learn how to manage capital - risk management.

But it should also be understood that it is very important not only to choose a trading strategy for yourself, but to strictly follow its rules.

For many years of trading, a large number of different trading methods have been developed, there are simply thousands of them. For beginners, it is still recommended at the initial stage to choose a simple and understandable technique.

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