Currency charts are easy to interpret, especially for someone that has traded stocks in the past. To pull up a real time chart of a stock, the trader usually has to select the chart period (1 day, 5 minutes, 15 minutes, etc.) and the ticker symbol of the desired stock. The concept is the same for a chart of a currency pair.
The trader would select the specific pair (U.S. Dollar versus the Japanese Yen, the Euro versus the Dollar, etc.) and the desired time period or timeframe for each bar of the chart. The example below shows a snapshot of a real time 15-minute candlestick chart of the Euro versus the U.S. Dollar (EUR/USD) currency pair taken from our MT4 platform (This system can be used to create free charts for 60 days and also to practice in a simulated environment).
The FX chart above shows a strong two-day move to the downside in the Euro versus the dollar, from a high of of 1.3784 (on the 9:15 AM bar on October 4th – indicated by the vertical, blue bar on the left) to 1.3637 on the 6:30 AM bar on October 5th). This is a difference of 0.0147 or 147 pips (in Forex, a "pip" is the smallest tick in the price of a currency, which is similar to a "tick" in stocks). In dollars, this move is equivalent to an amount of US$1,470 per lot for a standard lot, US$147 per lot for a mini lot, and US$14.70 per lot for a micro lot.
In our platform, currencies are traded in lots of 100,000 (100,000 x 0.0147 = $1,470), 10,000, or 1,000 base currency units. With a margin requirement of only 0.2% (500:1 leverage), meaning $200 per standard lot, $20 per mini lot, and $2 per micro lot, a 147-pip profit corresponds to a return of over 700% if a maximum leverage is used. In other words, while a move from 1.3784 to 1.3637 is only about 1.1%, with 500 to 1 margin this return becomes over 700% (Please Note: Increasing leverage increases risk; in this example, a move of 1.1% in the other direction would have wiped out the account, so watch your use of leverage!).
USDJPY Daily Chart Example
If you were to look at the chart below without knowing that it was from a currency platform, you might have thought that it was a graph of an 83-dollar stock. The image below actually shows the relationship between the U.S. Dollar and the Japanese Yen for almost a three-month period. Each candle represents one day of price activity, with the last candle on the chart showing the current value of the Dollar in units of Yen (83.19 yen).
Consequently, an investor that trades stocks can easily adapt to currency charts. If he feels that the dollar will go up, he simply buys. Then, for the sake of simplicity, let's say that the candles on his chart start moving up (e.g., 83.50, 83.75, 84.10, etc.). This means that his account is getting more positive.
Notice that three lines of different colors are superimposed on the actual chart. These lines are what are known in technical analysis as "Simple Moving Averages," arithmetic averages of the price of the currency pair over a certain number of periods. The moving averages shown on the above are 7-day (yellow), 14-day (blue), and 50-day (red) moving averages. Currency trading mainly involves the application and interpretation of technical analysis or TA on real time charts, just like the trading of stocks or involves applying technical analysis to real time equity charts.
Free Charting on the MT4 Demo
If you are a trader, by now you have probably realized that charting currencies is no different than charting stocks. Once you understand the section on how to read quotes, you can begin to practice your trading by applying technical analysis on the MetaTrader 4 platform. To get access to the platform, you can simply sign up for a free 60-day simulator here. The simulator will not only let you play around with different charts in real time, but it will also allow you to practice executing buy and sell orders at actual prices.