Reading forex charts is an indispensable skill if you want to succeed in currency trading. Once you know how to read charts, it will be easier for you to project the best entry and exit points. Below are the five important things to know when you read forex charts.

1.   When you buy a currency pair to long the position, you need to look for the chart of that currency pair to rise up in order to make a profit on the trade. You need the base currency to be stronger against the terms currency. Meanwhile, if you sell the currency to short the position, you need to look for the chart that indicates that the pair is sliding down, in order to make revenue. You need the terms currency to be stronger than the base currency.

2.   Be sure to check the time frame of the forex chart. Most trading platforms will use several time frames to determine the trade entry. For instance, a system may project a four hour chart to identify the general trend of the currency pair by using key indicators such as momentum, support and resistance lines, or MACD. There are also five-minute charts that you can use to spot a rise from a temporary dip to identify the actual entry. Thus, be sure that the chart you are analyzing has the right time frame for your analysis. The best way to do this is to set up the charts with the right time frame and indicators for the system you are trading.

3.   Most forex charts would display the bid price instead of the ask price. Take note that a price is always quoted with the ask (offer) and the bid price. For instance, the present price of EUR/USD could be 1.2166 bid and 1.2169 offer. Once you buy, you buy the ask that is the higher price in the spread, and once you sell, you sell at the bid price that is the lower price.

4.   Take note that the times displayed on the bottom of the forex charts are set to a specific time zone, which the forex charts are set to. It could be New York Time, GMT, PST, or other times zones. It is best to have an available reference for world clock to easily convert from one time zone to another.

5.   Lastly, check if the times on your forex chart is in accordance with the opening or closing time. Be sure that the charting software could be different to other traders.

These important pointers can help you to read forex charts properly and will help you avoid the usual mistakes that most beginners in forex trading make when they are analyzing charts.

Content credits : http://www.admiralmarkets.com/education/articles/trading-software/best-forex-charting-software