FOREX TOOLBOX

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There are a number of different tools in the forex trader's toolbox and one of the most important is the forex chart. In its simplest form, a forex chart is a graph of the performance of a currency pair over a set time period. Reading a forex chart is central to any trader's business and so it is important to be able to read them and to understand just what they mean.

A forex chart is plotted for a single currency pair such as the EUR/USD or AUD/CAD and shows the movement of the currencies concerned against each other over time. For instance, a EUR/USD chart shows you how the US dollar and Euro have moved against each other over the period for which the chart has been drawn.

Along the bottom of the chart is the timeline that can for example be divided into 15 minute, one hour, one day, one week, or longer time periods. Going up the right-hand side of the chart are incremental values that are usually set to run from a bit below to a bit above the bottom and top prices attained during the period in question. For example, for a EUR/USD chart the values may run from 1.2534 at the bottom to 1.2564 at the top.

A forex chart is useful because it gives a very clear and easy to read picture of how a currency pair is doing and you can see at a glance whether a currency is strengthening or weakening so that you can act accordingly. The selection of a time frame for a chart is also important as a short time scale can help you to see very minor trends while a long time scale can help you to identify longer term trends.