When trading forex, it is important to be able to read and understand the various charts and indicators that are available on the trading platform. One of the most commonly used charts is the OHLC chart, which displays the opening, high, low, and closing prices of a currency pair over a specific time period. In this article, we will explore what the OHLC chart means in the forex terminal and how it can be used to make informed trading decisions.
OHLC stands for Open, High, Low, Close. This chart is used to display the price movement of a particular currency pair over a specific period of time. The chart is divided into a series of vertical bars, with each bar representing a specific time period, such as one day or one hour. The top of each bar represents the highest price that the currency pair reached during that time period, while the bottom represents the lowest price. The left side of the bar represents the opening price, while the right side represents the closing price.
The OHLC chart is a useful tool for traders because it provides a lot of information in a single view. By looking at the chart, traders can quickly see the range of prices that a currency pair traded within during a specific time period. They can also see the direction of the trend, whether it is moving up or down, and whether there are any significant price movements, such as a sudden spike or drop.
One of the key benefits of using the OHLC chart is that it can help traders identify key levels of support and resistance. Support levels are areas where the price of a currency pair is expected to bounce back up after falling, while resistance levels are areas where the price is expected to turn back down after rising. By looking at the OHLC chart, traders can identify these levels and use them to make trading decisions.
For example, if a trader sees that the price of a currency pair has been bouncing off a particular support level for several days, they may decide to enter a long position when the price approaches that level again. Similarly, if they see that the price has been repeatedly hitting a resistance level without breaking through, they may decide to enter a short position when the price reaches that level again.
Another benefit of using the OHLC chart is that it can help traders identify patterns and trends in the price movement of a currency pair. For example, if a trader sees that the price has been consistently moving up over a period of several weeks, they may decide to enter a long position in anticipation of further price increases. Alternatively, if they see that the price has been consistently moving down, they may decide to enter a short position in anticipation of further price decreases.
In conclusion, the OHLC chart is a powerful tool that can help forex traders make informed trading decisions. By providing a visual representation of the price movement of a currency pair over a specific time period, the chart allows traders to quickly identify key levels of support and resistance, as well as patterns and trends in the price movement. By using this information to inform their trading decisions, traders can increase their chances of success in the forex market.
