What is a Currency Exchange Chart?
Traders use a currency conversion chart to analyze how a currency pair moves over a set period. Due to random events, market prices keep changing and knowing the trends helps with risk management and assessing the probability of losses or profits.
Although reading the chart is easy, it can be challenging for forex trade beginners. You should be able to identify and analyze the price pair movements and patterns and form a trend.
By the end of this article, you’ll be able to read and analyze currency exchange rates using different tables. You’ll also know all the types of price charts and their features.
Let’s get started.
Understanding the Currency Conversion Table
Currency charts are used by traders for technical analysis. They use past market prices and other indicators to predict future market prices and form trends. These trends will then help them know when they are likely to make more profits and when the market is unsafe to invest in.
Countries have different currency values due to various reasons. For example, the US dollar has a higher value than the Canadian dollar because they have different governments, and their economies vary.
Therefore, when traders compare the two currencies, they mostly compare the economies and governments in those countries. Further, countries differ in how they measure the value of their currencies.
There are three main types of currency charts, and you can use them all in currency trading. You could use the line chart, bar chart, or the candlestick chart, explained separately.
1. Line Chart
Line charts are easy to read because the currency movements are represented from one closing price to the other using a line, and you can see how it moves over time.
However, the downside of this chart is that it provides few details about the trades.
For example, it shows the trade’s beginning and end, but traders cannot know what happened between the two points. However, you can easily see the trends represented by the line’s slopes with the line chart.
With the line chart, traders concentrate more on the closing prices, ignoring the price fluctuations, which are also essential to know. The chart is used to get a broader picture of price movements within a certain period.
2. Bar Chart
A bar chart is a more complex exchange currency table because it shows the highs and lows of the market prices over a period while showing the opening and closing prices.
The bars are different in size, with some running vertically and others horizontally. The upper side of the vertical bar shows the highest traded price, while the bottom part shows the lowest. The bar sizes change with the increase or decrease in price volatility.
The horizontal lines show the opening and closing periods of the trade. The opening price’s horizontal hash is on the left side, while the closing price is indicated on the right side.
Unlike the line chart, this chart shows volatility, which is a significant difference between the two.
3. Candlesticks Chart
Most traders use candlesticks charts because they are easier to read. These resemble the bar charts, but they are more detailed because they have a graphic format. The charts have a vertical line indicating the high and low ranges.
As well, the candlestick charts have a block between the lines at the centre to show the range between the opening prices and the closing prices. The blocks are also filled to show bullish or bearish sentiments in the market.
The middle block is coloured in different shades to show when the currency had a lower closing value than it opened with. The top indicates the opening price, while the lower side shows the closing price.
To make the chart easier to understand, you can use green to indicate high closing prices and a red shade to show low closing prices. Other traders use candlesticks with black and white colours.
A significant advantage of the candlesticks is their ease to read and interpret. Furthermore, you are more likely to remember how to read and interpret a chart if there are colours involved, making trading easier.
As a trader, you can choose the type of currency exchange table you are most comfortable using.
Tips When Reading the Currency Conversion Chart
Although reading and interpreting the currency charts could be more manageable, one mistake can mess the trader up. For example, when reading the diagrams online, ensure you adjust the time to view currencies change in 24 hours, a week, or a month.
The bars represent different ranges of currency values. For example, the top part of the bar shows the highest traded value over your chosen period, which could be 24 hours, a week, or a month. The bottom part of the bar shows the lowest traded value. Therefore, you will visualize a trend to help with the market prediction from these values.
Is the exchange rate currency table necessary for travellers?
If you are moving between countries, there is no need to keep looking at the changes in the currency throughout your trip. Instead, research the current exchange rates of the currency you want, and you can estimate the value you will get.
Besides, if you are travelling on a budget, you can avoid the inconveniences of getting less money after exchanging because of the volatility of the rates. Consider changing your currency before your travel date. You can do this at the country’s embassy, local banks, or through a reputable foreign exchange company like Knightsbridge FX before you start the journey. Knightsbridge FX offers bank-beating rates and allows you to save on hidden fees.
The other alternative is using a foreign credit card. However, you could pay an additional fee to get one making it more expensive. Spending more than your budget is also easy when using a credit card.
Avoid exchanging the currency at the kiosks at the airport. They charge high exchange rates and an additional exchange fee which can mess with your budget.
There are many forex exchange charts online, but not all are easy to read and interpret. Although they use the same data to create the chart, the presentation varies.
Final Words
Reading and interpreting a currency conversion chart is easy, but it requires the trader to learn how first. There are many currency charts, and you can choose any depending on your preference. Although it can be challenging to decide which chart will be the best to use, this guide will help.