The Part Played By Free Chart Pattern Recognition Software For Forex

Trading in the forex market nowadays demands a good understanding of technical analysis and the ability to keep track of currency pairs by mastering the skill of reading live or real time forex charts. For the novice trader this also means locating a source of good online forex charts. Or, even better, if you can find some free chart pattern recognition software for forex and find out how to use it you will put yourself well on the path to trading with a fair degree of confidence.

Forex charts provide information about currency prices at particular time intervals that can range from as short as one minute clear up to many years and prices are plotted either as simple line charts or bar or candlestick charts giving price variations at set time intervals.

Line charts are simple to read and provide a wide overview of price movements which often demonstrates well defined patterns in price movements. By contrast, bar charts are more difficult to read but do give you far more information.

Put simply, the length of a bar on a bar chart depicts the price spread for a given period and the longer the bar the larger the variation between high and low prices. The opening and closing prices are indicated on every bar so that you can see at a glance whether the price has risen or fallen and precisely what the variation in price has been. While bar charts can sometimes be hard to read, the majority of chart pattern recognition software packages simplify the process of reading bar charts quite considerably.

Invented by the Japanese for the analysis of rice contracts, candlestick charts are similar to bar charts but are much simpler to read because they are colored. For example, green candlesticks are used to show prices that are rising while red candlesticks indicate prices which are falling.

The beauty of candlestick charts is that candlestick shapes when they are seen in relation to each other produce clearly recognizable patterns a number of which have been given names like ‘Dark Cloud Cover’ and ‘Morning Star’ and having learnt to identify these patterns it is a simple matter to pick out market trends.

In spite of the fact that a price chart can provide you with a lot of information about a specific currency pair this is generally supplemented using a number of forex technical analysis indicators including trend, strength, volatility and cycle indicators that are used to predict both market movements and volume.

A number of common forex technical indicators include Moving Average Convergence/Divergence (MACD), Averge Directional Movement (ADM), Stochastic Oscillators, Relative Strength Indicators (RSI), Moving Averages and Bollinger Bands.