The Importance of Real Time Forex Charting

Do you want to earn money in the arena of foreign exchange? In order to accomplish so, you should possess in-depth technical knowledge, focused on the capability of tracking currency exchange rates, through interpreting actual forex charts.

If you are an amateur in this field, you should quickly discover authentic forex charts from the Internet or may opt for free actual forex charts. 

The best option is however, to take the help of free chart recognition software and mastering on it, you are well suited for this business.

Online forex charts keep you updated about currency values at any time, even between short time gaps like minutes to long intervals like several years. 

The graphs depicting the oscillations in rates are line graphs, or bar diagrams or candlestick charts.

Line charts are easy to interpret and help you to broadly check ups and downs of prices. It aids you to track the current trend of rate movement.

 On the contrary, bar charts are not as lucid as line graphs but supply a much in depth information.

To summarize, the length of a bar chart depicts the amount of rise or fall in price and the breadth gives the duration, which has witnessed this. 

Initial and final rates are mentioned on chart so that you can identify the range and whether it’s a fall or rise. 

There are pattern recognition software available that interpret the bar diagrams for you and make your task easier.

The Japanese were first found to use candlestick charts to plot their amount of their rice production. Since then they have been increasingly popular. 

Though they are similar to bar diagrams, they are colored.

Each color acts as a code to signify the rise or fall in price. The index is written on the graph itself. Thus candlestick plots are much more user friendly than bars. 

Candlestick charts have unique patterns and they are as pretty as to be named after natural beauties. As soon as you are able to identify the particular pattern you will identify the market trend.

An actual forex chart is often complemented with many technical indicators such as trend, strength, volatility and cyclic movements. 

A forex chart is useful itself, but this adjunct information is provided to ease your task of market analysis to predict both movements in the market and market volume.

Calculating Interest on  Forex Trades

One of the best things about Forex trading is the fact that one can trade using leverage, thus borrowing as much as 1,000 times your capital in order to make a trade. 

However, borrowing money for trading in foreign exchange is the same as borrowing it for other purposes—interest must be paid on the loan. 

However, as currency trading involves both buying and selling, the interest due on your loan can be offset by the interest earned on the currency you buy. 

Before going on to particular examples, let us take a look at interest rates in general, to see how the foreign exchange market is affected by it. 

In central banks, interest rates are set in accordance with a country’s monetary policy—high interest rates make the currency more expensive to buy and lower interest rates make it less so. 

Imagining the government of a country with high inflation will help you understand how interest rates are used.

The government, because of rapidly rising prices, might decide to raise interest rates.

 This would increase the cost of the country’s currency, and make demand and consumption fall, as borrowing would be more expensive.

This in turn would cause prices to fall and inflation rates would come down. 

Similarly, a country undergoing recession might lower interest rates to boost the country’s economy, as lower price of currency would cause demand, and, therefore, supply, to increase. 

Interest rates set by central banks also determine at what rate commercial banks can borrow from governments and lend to their customers, including forex traders. Which tells us how interest rates affect this trade.

A trader who, for example buys GBP/USD, needs to borrow the Dollars to buy the Pounds and will, thus, pay interest on the USD and earn it on the GBP. 

If the interest rate the Bank of England sets for the UK Pound is higher than the one set by the Federal Reserve for the US Dollar, the trader will earn more on the UK Pounds he bought than he pays on the US Dollars he borrowed, thus making a profit.

However, unless there is a significant difference between the two interest rates, the net profit or loss will be marginal. 

Besides, while interest rates are set on an annual basis, trading positions are usually opened for short periods. This serves to significantly lower any gain or loss on interest rates.