Need Help? Visit our Help Section. Login Register. Quick access. Help Section. FxPro Help Centre - Glossary. Forex glossary terms and definitions Period. Period In trading, a period is a standardised unit of time used in the monitoring of an asset. Other terms in this category Parabolic SAR. Pending Order. Didn't find what you needed? As the price fluctuations become increasingly volatile, the bars become larger. As the price fluctuations become quieter, the bars become smaller.
The fluctuation in bar size is because of the way each bar is constructed. The vertical height of the bar reflects the range between the high and the low price of the bar period. The horizontal hash on the left side of the bar is the opening price, and the horizontal hash on the right side is the closing price.
A bar is simply one segment of time, whether it is one day, one week, or one hour. Open : The little horizontal line on the left is the opening price. Low : The bottom of the vertical line defines the lowest price of the time period. Candlestick charts show the same price information as a bar chart but in a prettier, graphic format.
However, in candlestick charting, the larger block or body in the middle indicates the range between the opening and closing prices. Traditionally, if the block in the middle is filled or colored in, then the currency pair closed LOWER than it opened. Here at BabyPips. They just look so unappealing. A color television is much better than a black and white television, so why not splash some color on those candlestick charts?
We simply substituted green instead of white, and red instead of black. This means that if the price closed higher than it opened, the candlestick would be green. For now, just remember that on forex charts, we use red and green candlesticks instead of black and white and we will be using these colors from now on. The purpose of candlestick charting is strictly to serve as a visual aid since the exact same information appears on an OHLC bar chart.
There are many different types of charts available, and one is not necessarily better than the other. The data may be the same to create the chart but the way that data is presented and interpreted will vary. Each chart will have its own advantages and disadvantages. You can choose any type or use multiple types of charts for technical analysis.
It all depends on your personal preference. Because it is easy to believe in a trade that conforms to conventional wisdom. It used to bother me to be wrong on a trade. I would take it personally.
Moving averages are used to identify significant support and resistance levels. Traders and market analysts watch for crossovers of longer-term moving averages by shorter-term moving averages as possible indicators of trend changes in intraday trading and in regard to long-term trends. Most moving averages act as both trendline indicators and as the building blocks of more ambitious technical tools.
There are numerous variations of moving averages. They can be calculated based on closing price , opening price , high price , low price or a calculation combining these various price levels. Most moving averages are some form of the simple moving average SMA , which is the average price over a given time period, or the exponential moving average EMA , which is weighted to favor more recent price action.
Simple moving averages can be slow to catch up if large price swings occur. Traders often look at exponential moving averages instead, as they react quicker to price changes, therefore providing a more accurate reading. Time is of the essence when trading.
An EMA and double exponential moving average DEMA both reflect the current price trend for given securities in a more up-to-date reading. Because moving averages by nature are lagging indicators, getting the readings up to speed is important. The EMA gives more weight to the most recent prices, thereby aligning the average closer to current prices.
Short-term traders typically rely on the or day EMA, while the ever-popular day and day EMA is used by long-term investors. While the EMA line reacts more quickly to price swings than the SMA, it can still lag quite a bit over the longer periods. DEMA helps to solve the lagging issue , bringing a moving average line closer to the current fluctuations in price.
Essentially, this means even more weight is applied to the recent data, bringing the DEMA line into closer correlation with the current price. One of the most common trading strategies traders use with the DEMA tool is identifying price movements when a long-term and short-term DEMA line cross. For example, if a trader sees a day DEMA come down and cross the day DEMA a bearish signal , they may sell long positions or place new short positions.
Conversely, the trader enters long positions and exits short positions when the day DEMA crosses back up and over the day. Moving averages are backward-looking by nature. While EMAs can reduce the lag effect on developing trends, they still rely on past data that can never be applied to the future with complete confidence. Securities sometimes move in price cycles and repeat behavior, but past trends that are plotted with a moving average may have no relationship to future movements.
Additionally, the increased reliance on recent price movements with an EMA tends to make it more sensitive to false trading signals, or whipsaws , than an SMA. For this reason, an EMA may require further confirmation before a trade can be identified. There is also room for user error with any EMA. Traders must decide how long of a time interval to apply to their formula, and they must also decide how heavily to weight towards recent prices and which prices are considered to be recent.
False signals can be generated through inappropriate parameters. For more, read our moving averages tutorial. Technical Analysis Basic Education. Technical Analysis. Your Money. The time period each of these time frame categories tends to cover that is most relevant for swing traders can be described as follows:.
Finally, those engaged in long term foreign exchange trend trading or foreign currency investment activities tend to have a much lengthier time frame that they are willing to hold positions for. When a technical forex trader is analyzing exchange rate data for a particular currency pair, they will often view this information in the form of close, bar or candlestick charts that are plotted at several different time frames or intervals.
The RSI is shown in the indicator box below in pale blue, while the day moving average is superimposed over the exchange rate in red. Some of the most common incremental time frames used by technical analysts when reviewing exchange rate movements for forex currency pairs include the following:. In addition, some very short term traders like scalpers might look at tick charts, which do not have a particular fixed time interval between data points.
They instead show a new data point every time a certain number of trades take place or some other measurable criteria is fulfilled. A number of different strategies with varying timeframes are typically employed by forex traders. The timeframes for holding positions in the strategies to be mentioned below vary from less than a minute for scalp trading, to weeks or even months for long-term trend trading. Swing and range trading time frames can vary depending on market movements, although positions are often liquidated within several trading sessions.
As the name implies, those using a day trading strategy customarily liquidate their positions by the end of the trading day. The ending time of which is specified in advance due to the forex market being open 24 hours a day throughout the trading week that starts on Sunday afternoon with the Auckland, New Zealand open and runs until the New York close on Friday afternoon.
In addition to scalping, swing trading, range trading and trend trading, another type of strategy consists of news trading. News traders typically use fundamental analysis for the objective of profiting from market volatility seen after major news announcements. What follows is a list of the more popular trading styles and their respective trading timeframes:. The timeframe for scalp traders is generally very short, since traders liquidate positions as soon as they make a small profit.
Conversely, if the market is moving against them, successful scalpers tend to take their losses just as fast. Day trading is popular among many traders in the forex market, as it allows the trader to have no open positions to worry about overnight. The timeframe for range traders varies widely and can be from a few hours to extending into the following trading session and beyond.
Once a position is established at the lower or higher end of a range, the trader then needs to either wait for the position to go to the target level, or conversely take a loss if the position has gone in the opposite direction. Many swing traders try to exploit multi day price patterns in the market. Typically, currency trend traders look for long term trends and relative movements in benchmark interest rates.
It can take several weeks to months or even years for the trend they have identified to fully unfold before liquidating their positions when they think the time is right. Although taking this long term trend following perspective can involve increased risk of prolonged drawdown periods , successful trend traders are some of the highest earners among forex traders when the conditions are right.
While most novice traders tend to shun the approach, at least initially, taking a swing trading or long term outlook is generally recommended for newer traders , especially since their reaction times tend to be longer due to their relative inexperience in the market. Nevertheless, the truth of the matter is that short-term trading is considerably more difficult and usually takes the trader quite a long time to master since they need to evolve their reactions and emotional states to the point where they can be successful.
New traders therefore should consider beginning to trade with a longer term outlook, since this will also generally reduce their trading frequency and teach them the importance of operating strategically. Once their trading methods have proven successful, they can then move on to dealing in the shorter time frames is they wish.
A trading period is. In trading, a period is a standardised unit of time used in the monitoring of an asset. For instance, on a candlestick chart each candlestick refers to one. Forex market hours refers to the specified period of time when participants are able to transact in the foreign exchange market.