September 24, 2015 at 1:57 pm
So you have finally found a way to live out your dreams of financial freedom. You decided that you want to start trading the markets to achieve your goals, but you have no idea where to start. The first thing you need to do is to decide whether you want to be a Technical or Fundamental trader. Technical Analysis is where traders analyse charts to anticipate whether the market will go up or down. The other way of analysing the market is through Fundamental Analysis. This type of analysis is when you speculate what impact news releases will have on the markets. You don’t really need charts when trading with Fundamentals.
The most common way to trade Binary Options is through Technical Analysis. In order to trade using Technical Analysis, you will need to have Forex charts. Trading without charts will be like driving a car with a blindfold on. You need charts to analyse where to buy and sell. No, I am not talking about the small charts on Binary Options Broker Platforms. Those are useless and won’t mean anything if you are looking to analyse the market. What you need is a proper charting program. There are a few programs that you can choose from. Here is a list of the popular ones:
The most popular charting platform among most traders will be Metatrader 4. Follow this link if you want to download the program – Metatrader 4. After you downloaded the program, you will have a choice of different chart types to choose from. So let’s have a look at your available options.
As indicated by Steve Nison, candlestick charting initially appeared sometime after 1850. A significant part of the credit for candlestick development goes to a legendary rice trader named Homma from the town of Sakata. It is likely that his ideas were changed and refined over numerous years of trading, eventually bringing about the candlestick charts that we utilize today.
Candlestick charts are formed with a series of candles. Each candle represents the open, close, high and low of a predefined amount of time. The most popular time intervals are as follows: 1 minute, 5 minutes, 15 minutes, 30 minutes, 1 hour, 4 hours, 1 day, 1 week, 1 month.
Figure 1 – Candlestick Representation
Let’s use the 1-day candle for an example. The filled or hollow portion of the candle is referred to as the “body”. The body will indicate the opening and closing price for the day. The thin lines above and below this body are called wicks, shadows or tails. These wicks show us the high and low range of the day. Normally, a candlestick that closes higher than the opening will be one colour and candles that closes lower than the opening will be a different colour. You can customize the colours just as you wish.
Figure 2 – Candlestick Chart
Many traders choose to use candlestick charts because it is easier for them to interpret, and the charts are more visually appealing than other. It is very easy to read price action when you are using candlesticks because you can quickly see where the high, low, opening and closing prices are. Long candles will indicate strong buying or selling pressure. Small candles will indicate little movement that represents a period of indecision or better known as consolidation. There are different candlestick patterns that form which you can use for buying and selling opportunities. We will get into all the different patterns in another article but for now, let’s first focus on all the different chart types.
Bar charts are also known as OHLC charts. OHLC stands for Open High Low Close. These charts are almost exactly the same as candlestick charts. The only difference is that it uses a “bar” and not a “candlestick”.
Figure 3 – Bar Representation
You can also choose which time interval the bars should be. The top of the bar indicates the highest point and the bottom of the bar the lowest point during the chosen time period. The opening price is displayed on the left side of the bar, and the closing price is on the right side. The bar itself indicates the total trading range during the specified time.
Figure 4 – Bar Chart
Line charts are the most basic trading chart that you get. It shows an asset’s movement as a line on the chart. The line will draw from one closing price to the next closing price. It will not show the open, close, high and low like the other chart types does. This chart is a bit difficult to analyse and trade from. Most traders just use the line graph to see the general price movement of an asset over a certain period of time. Unfortunately, this is the only chart type that most binary options brokers provide us to trade from.
Figure 5 – Line Chart
It all comes down to personal preference at the end of the day. I personally like to use candlestick charts, probably because I have been using them from the start. I would, however, advise you rather to stay away from line charts. It can be nice to use them for drawing in support and resistance levels, but you don’t need them to be able to trade successfully. Let’s take a look at some of the advantages that candlestick charts have:
So there you have it, folks. Now you know what the differences are in chart types and where to download charting programs. You will have to play around and see which chart type you like best. I will make sure to write another article soon with all the different candlestick patterns and how to use them to your advantage.
September 24, 2015 at 4:01 pm
Most beginners are not aware that they need to download a charting platform. Wish I had found this article when I first started. I did not know where to begin. I was overwhelmed with all the information.
September 25, 2015 at 5:10 am
I know most traders use Metatrader 4 but I prefer to use Ninjatrader platform.
September 25, 2015 at 11:33 am
Would you mind sharing why you like using Ninjatrader instead of Metatrader?
September 25, 2015 at 9:41 pm
The quality of the data is much better in my opinion and I like the fact that I can use tick charts with Ninjatrader. Metatrader does not provide tick charts; they only have time-based charts.
September 26, 2015 at 2:08 am
I have never traded with tick charts before. Maybe I should look into it and try it out. I also heard that you can change the time intervals to anything you like?
September 26, 2015 at 3:53 pm
Yes it’s true. I use 10 and 3 minute candlestick charts combined with tick charts to pinpoint my entries.
September 26, 2015 at 10:45 pm
Sounds pretty awesome! Thanks for all the info. Happy trading
September 27, 2015 at 10:06 am
I also prefer using Ninjatrader. I use it for my futures trading and the other great thing about it is that it has much more assets to choose from than what Metatrader has got.
September 27, 2015 at 3:19 pm
For some reason I like to use bar charts. Candlestick charts are just too colorful and bulky for me. Bar charts look much cleaner. But anyway, as long as it works for you.
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