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For the newbie trader Forex trading often appears as an esoteric subject. With all the psychedelic colors that appear on the trading screens you would easily start wondering if forex trading can indeed be done by ordinary people. That could well be the case when you open out forex charts as an adjunct to your trading screen, especially as it has a lot to do with lines and colors. But as a matter of fact, forex charts are very easy to learn and doesn’t require any special mathematical skills whatsoever.

Let’s take a look at the 3 types of charts that is relevant to forex trading and learn how to read charts. Before we start looking at charts, one has to understand the concepts of fundamental analysis and technical analysis. Both these concepts are used to analyze currency markets and forecast the direction of future currency price movements.

Fundamental analysis deals with economic, social, and political forces that drive supply and demand of currencies and how price movements take shape on account of the same. On the contrary, technical analysis means studying currency price movements by itself in order to make a prognosis of future currency price trends. A currency “chart” is quite simply a tool used in technical analysis.

Forex investors can use both types of analysis to make trading decisions. But the surmises based on technical analysis is what makes you open or close deals, its all the more important to be able to read charts. In short charts as mentioned earlier are an important tool in technical analysis.

A chart tells you the sum total of what’s happening in the market as a graph of the prices of a currency pair over a fixed period of time. You can call it a visualized representation of currency price movements, as a result of activity that goes on between buyers and sellers in the currency market. Forex charts tell a clear picture of whether a pair of currencies is getting stronger or weaker so that you can make your trade likewise.If it is the currency pair EUR/USD, a chart for the day can offer much insight in terms of price levels and general market trends. Therefore it is an indispensable tool for any currency trader.