Currency trading with chart technique?

A chart graphically represents the price development of one or more currencies. With the help of this visualization it is easier for the trader to see how a currency develops within a certain period of time.

With the help of the chart graphic, the trader is able to immediately recognize the price trend of the currency. Consequently, the various chart representations are an important tool that helps traders to make their trading decisions accurately and quickly. Both the scale and the chart shape determine how well a chart can be interpreted and read. Especially in the entry phase, traders should opt for a simple chart representation in order to achieve initial trading successes in a timely manner.

The simple chart form is the linear scaling in the form of a bar chart

Although the linear chart is easier to read, it provides little usable information for an ideal assessment of a currency trend. The bar chart is equally easy to interpret and provides more comprehensive information on the performance of the traded currencies.

Beginners taking their first steps in the trading world should therefore opt for a bar chart in the form of a linear scale. For the ideal structure of a chart, not only the form but also the scaling is important. With the scaling, the individual steps of the performance of a currency during the observed time period are plotted on the chart. A trader is only able to interpret a chart model correctly if he knows which scaling it is based on. Currency trading mainly works with logarithmic and linear scaling. Beginners should choose to use linear scaling because it is easier to interpret and understand than logarithmic scaling. Linear scaling represents the constant and continuous performance of a currency. With this scaling, the individual value development steps are drawn into the chart at a constant distance. Each drawn step of a linear scaling represents a pip and is represented by a line of the same size regardless of its height.

A scaling works with its representation similar to a map

If a currency moves by 20 pips, the scaling in the chart shows a line 20 cm long. Logarithmic scaling does not work with fixed scales, but works depending on the previous price movements. It first defines a fixed point from which it draws all price movements in the present chart. Each displayed pip refers to this fixed point and represents the percentage performance of the underlying currency against it. If a currency rises strongly at the beginning of the observed period, this price development is represented by a long line in the chart. If the currency rate continues to rise in the same proportion, it does not increase in strength. With the linear scaling, the line would now be drawn in the same length. With the logarithmic scaling, it is drawn shorter, since the currency rate rises in relation to the important fixed point exclusively in the same proportion, but not disproportionately.