Forex graphs are important factors that you need to understand to get into forex trading. Reading forex graphs is an art and you need to know all the jargon to be able to read and understand the forex graphs. Let us go through the nook and cranny of the forex graphs on Multibank in order to secure a wonderful position in forex trading. There are forex candlestick charts that will give more insights on the forex price based on your intuitions.
The bullish movement of the forex charts usually denotes an upward and positive movement and bearish movement is negative and downward. The people who buy bulls or rather buys are always wanting to increase the market price by buying away the forex and on the other hand, people who are the bears or the sellers want to bring down the market price by selling forex.
What are Dow’s theory and its six different tenets?
The main fundamental ideas behind the Dow theory are: the market usually considers all the past, present, and future aspects to make the pricing, movement of the pricing is extremely random and they can be both short term and long term. There are six different tenets of the Dow theory they are:
- Three movements of the market
There are three movements of the market which are the:
- Primary movement or the main movement that is the major trend and it generally will last less than a year or even up to several years. It can be either bearish or bullish.
- Then secondly there is the medium swing which is actually the intermediate reaction and it usually lasts from 10 days to a maximum of three months.
- Lastly, we have the short swing or the minor movement which varies with the market and it lasts from hours to months or even much more.
Covered Topics
Three different phases of the market
There are three different phases in the chart which are the accumulation phase, absorption phase, and distribution.
- The Accumulation Phase is the period in which experienced and wise investors start their venture of buying or selling the assets against the general idea of the market. During this time the price does not change much because the investors are actually a minority.
- The absorption phase or the phase of public participation in which a trend is formed from the knowledgeable investors and the people who start following them.
- The distribution phase is the last phase where the investors actually start to distribute their holdings in the market after huge speculation and the entire pricing starts falling down along with the volume.
The stock market is based on all the information
All the information is considered for forming a trend in the stock market. It means that all the new information is always incorporated with the growing trend for which there is always change in prices. Major factors like the product initiatives, projection of revenues, major elections, etc. are integrated into the marketplace.
- The average of the stock market must be confirmed one another
For example, a company’s market trend depends on another company then they both need to have a positive or a negative graph together so that the investments can be done on the independent company. The average should always be converging for the investor to invest in the company.
- Trend and volume are proportional
It is rightly said that trend and volume are absolutely proportional to one another because if there is an uptrend then definitely the volume will be increasing with increasing price and if there is a downtrend then obviously the volume will decrease with a decrement of the price.
- The trend is carried out until any new trend is confirmed
Until and unless there is any new trend officially announced, the old trend is carried forward. It tends to hold back the characteristics of the previous trend.
Few important points:
- Time Frames
There are four different time frames that are: 15-minute chart, hourly chart, 4-hour chart, Daily Chart(1-Day). There are two types of traders based on the time frame: Intraday traders who usually open and close their position within a single day and Long term holders that usually make more value in hours, 4-hours, daily, or even weekly charts.
- Candle Stick
There are various models of candlesticks like the bullish reversal models and the bearish reversal models. The Bullish reversal models include Hammer, bullish engulfing Pattern, and Morning Star. There are Bearish Reversal patterns like a Shooting star, Bearish Engulfing Pattern, and Evening Star.
- Market Cap
The market cap is the greatest indicator of the stability of the coins and its formula is the Total Circulating Supply X price of each coin.
- Relative Strength Index
The Relative Strength Index or the RSI is the measure of the strength and the speed of the market’s movement of the price which is done by comparing the current forex price to the performance in the past. The formula is RSI= 100-(100/(1-RS)) (Where Rs= ratio of the avg days the coin was up to the avg of all the days when the coin was down).
If you want to get pro in the forex trading industry then an excellent understanding of the graph is necessary. If you really want this, then go learn to read the graphs well. Take reference from the above article and go deeper into the topics. Once you are well versed, nobody can stop you to be an achiever in the forex trading industry. Happy trade-in!
