Why Traders Use Forex Charts

Forex charts provide powerful insights and patterns into the currency market. And more importantly make technical analysis work, because of collective thinking.

How Forex Charts Make Technical Analysis Possible

Traders use forex charts because they provide great insights into how currencies trade, but also into how other traders think. All forex strategies rely more or less on chart analysis, factors such as volatility and momentum can be seen and understood at a glance. Without charts, it would be very difficult to get a sense of of these factors and make wise trading decisions. This is because humans understand much more and much faster out of graphically represented data, than simple numbers where price history cannot be put in perspective. Not just traders, but all kinds of analysts use charts. All kinds of scientists and physicists use charts and diagrams to simplify analysis techniques. A famous example are Feynman diagrams, invented by physicist Richard Feynman. They were originally opposed by his colleagues, but later adapted for good, by physics. Simply because they illustrated how subatomic particles behave, in a simple way which related time and other parameters. And as a result, even a non scientist could figure things out, as opposed to series complicated equations. So graphical representation is very powerful in many fields, not just trading and investing. Some market analysts developed many insightful trading methods based on charts. Those were charts showing trading volume, the relation between price and volume, or price relative to all kinds of indicators, such as momentum and strength indicators.

Charts Reflect Traders’ Thoughts and Actions

Forex charts reflect so much more information that one tends to think. All traders who want to learn how to trade forex start their journey of learning on charts. Regardless if they are learning on their own, or they have a mentor, charts tell the whole story all in one picture. One can figure out how the forces of supply and demand make currency pairs move up and down, how traders panic or make confident trades, and so much more. Trading is really possible exactly because of the insightful views that charts provide. What is forex trading like without using charts? Without using charts a trader can still trade, but they will have no idea how the other traders think, whose collective actions move the currency markets. So such a trader would be at disadvantage, and they will always be one step behind the latest action. Momentum indicators, support and resistance levels, and the entire trend in any currency pair can all be figured out correctly, only when charts are used. Everybody, even floor traders who trade stocks, do use some kind of chart before going onto the trading floor. They actually do this at home, and they go to the trading floor having taken some support and resistance numbers out of those charts. Hence no trader trades without charts, even if it seems so. The forex market is decentralized, there is no trading floor, no market noise, and all forex traders around the world are simply connected through the common charts they look, study and act upon.