Forex trading can be daunting when you are first starting out, with prices moving endlessly, market conditions that keep changing and breaking news happening around the globe. However, this does not have to be limiting. By learning to read charts or follow financial news, you can optimise your trading approach and improve your decision-making.
In this article, we will walk through charts and news in simple terms. You will learn how charts reflect market behaviour, the patterns that matter most and how to combine this knowledge with real-time news updates for smarter trading.
Why are charts important to forex trading?
Charts are very important in forex trading. They provide a clear picture of price movement, enabling traders to spot patterns, trends and turning points. Instead of reading long reports and endless data tables, forex charts turn complicated information into a clear visual format.
Charts show how prices have previously moved and help traders speculate on how they might move in the long term. You can see these movements over seconds, minutes, hours or months based on the selected timeframe.
As a result, charts are very useful to traders, whether they are scalpers, chasing small price shifts, or long-term traders, studying bigger Trends.
However, one should always use past results with caution and risk management.
If traders didn’t have access to charts, it would most likely be impossible to track volatility or manage risk effectively. Therefore, irrespective of the level of complexity, all strategies start with analysing charts.
5 types of forex charts
There are several types of charts used by traders to read the market. Each one highlights price behaviour in a different way.
Line negociação no mercado cambial chart:
This simple type shows the closing price of each period, making it ideal for spotting trends quickly.
Bar chart (HLOC):
This type highlights intraday sentiment and volatility by showing the high, low, open, and close for each period.
Candlestick forex trading chart:
This is one of the most popular forex tools. Although candles emphasise the information emphasised by bar charts, they are clearer visually which makes patterns easier to identify.
Mountain (Area) chart:
This is a line chart variation that shades the area below the line. It is often used for a quick, high-level view.
Heikin-Ashi:
This one is amore advanced variation of candlesticks that smooths out noise and helps traders focus on the underlying trend.
Candlestick charts dominate forex trading. They provide quick insight into bullish or bearish momentum, making them important for trading decisions.
What are some key chart patterns traders should know?
Charts are only helpful when you know how they work and what to look for. Common chart patterns provide traders with valuable information on the market’s potential direction.
There are certain patterns in prices that repeat themselves in forex, therefore, recognising them gives traders an edge.
For example, Head and Shoulders is a pattern signalling a reversal, where a peak, which is the head, is surrounded by two smaller peaks, the shoulders, suggesting that a trend may be coming to an end.
Next, there are ascending, descending or symmetrical triangles that usually show a continuation while prices narrow prior to breaking out in the direction of the trend.
Flags and Pennants are short-term continuation patterns appearing after sharp moves, suggesting that momentum will possibly continue after the short pause stops.
In the meantime, Double Tops and Bottoms can signal a reversal that occurs once price doesn’t break higher (double top) or lower (double bottom). Last but not least, an Engulfing Candlestick pattern indicates a strong reversal once one candle engulfs the previous one.
Types of forex trading news that move markets
Like chart patterns, there are certain types of news that have a huge impact on the prices of currencies. If you understand them, it will be easier for you to expect volatility and get ready for opportunities that might arise.
Central bank announcements:
Decisions on interest rates, monetary policy statements and central bankers’ speeches often lead to sharp moves. Usually, the higher the interest rates the stronger the currency. Cuts in interest rates might weaken it.
Economic data releases:
U.S Non-Farm Payrolls, GDP growth, inflation (CIP) and unemployment figures, are reports that can change sentiment right away. Traders monitor economic calendars carefully so as to be ready for such events.
Geopolitical events:
Events such as wars, elections or trade negotiations may cause uncertainty. In such cases, there is usually increased demand in the U.S dollar, Japanese Yen or Swiss franc, which are considered “safe-haven” currencies.
Market sentiment & risk tolerance:
There are times when it’s not only about just about one event but rather the overall sentiment. This refers to whether traders feel confident or not. Sentiment drives markets. For example, when there’s is uncertainty globally, traders may sell high-risk currencies and buy safe-haven ones.
If you learn which news are the most valuable, you can cut through the noise and focus on the events that truly have an impact on the markets and therefore, your trading approach.
Using charts & news together in forex trading
Charts show you what is going on. News, however, explain the why. If you rely only on one of the two only your trading approach will not be complete. For example, a chart my show the USD strengthening, but news about a FED interest rate cuts could provide the reasons behind. If you combine both you can the whole picture.
Research and studies have shown that combing chart patterns with market sentiments leads to more consistent results. If, for instance, charts show resistance in EUR/USD, but news confirms weaker Eurozone data, traders get added confidence in taking a short position on the pair.
Tips to get started
Putting all the above together does not always have to BE difficult. Below are a few simple steps to begin:
Start by opening a demo account so that you practice and test charts and strategies without risking real money.
Use multiple timeframes to analyse charts at both short-term and long-term levels. This way you will ensure that your trades align with the bigger trend.
Check the news calendar daily, for events such as central bank decisions or employment data that can influence markets instantly.
Focus on risk management by using stop-losses and by avoiding risking more than 1-2% of your capital on one trade.
If you follow these steps, you will your trading approach simple, organised and perhaps less stressful.
Considerações finais
To get into forex trading effectively, one does not need to master every technical indicator or keep track of every news headline. The key to trading effectively is the balance between the two.
While charts help you spot patterns and price movement, the news explain the reasons why markets move and most of the time they signal when big changes might come.
If you focus on key chart patterns and keep an eye on major news, including central bank updates, economic data ou o eventos geopolíticos, you can simplify your decision-making by a lot.
Combining the two will give you the tools you need to spot opportunities and the context to act on them with confidence.
Isenção de responsabilidade: Este material destina-se apenas a fins informativos e educativos e não deve ser considerado como conselho ou recomendação de investimento. A T4Trade não se responsabiliza por quaisquer dados fornecidos por terceiros referenciados ou hiperligados nesta comunicação.
