FOREX Charts, Bars, and Trading Spaces for Technical Traders
Assuming you're a technical trader, using news as your fundamental analysis component to gauge the long-term trend and the underpinnings of the short-term market.
The market -- as depicted in the price movement of a chart -- is the sum total of traders at all price level spaces and the complex interactions between them. A tug of war is occurring at each price level between buyers and sellers endeavoring to pull the market in one way or the other. Buyers wish to move prices up, obligating sellers to liquidate their positions by buying, driving prices even higher.
[caption id="attachment_13159" align="aligncenter" width="550"] The FOREX Tug of War[/caption]
This action is occurring at many price levels simultaneously. A chart time frame is the means by which technical traders zero in, or focus on, a particular level of this tug of war. Each vertical bar represents the range of prices from high to low, made over a specified time. The chart in Figure below also shows the opening price of that bar and the closing price of that bar with a small horizontal tick.
[caption id="attachment_13160" align="aligncenter" width="550"] Time Frames as Depicted by Chart Bars[/caption]
All trading platforms allow the user to view any pair at a wide range of time frames. The most common are:
Tip: Think of each discrete time frame as a tug of war between buyers and sellers battling at that price level.
Tip: Markets do not know they have time frames. These are an artificial construct to help us dissect the price action at different levels. The perfect world would be a 5-minute chart on a 12-foot wide monitor.
A trending market at one level may be part of a trading market at a higher level. It is always relative to your focus, your frame of reference. See this in the two squared areas of the 15-minute bar chart (Figure below- Relativity of Markets on Different Time Frames -- 4-Hour) and 4-hour bar chart (Figure below- Relativity of Markets on Different Time Frames -- 15-Minute) of the EUR/USD.
[caption id="attachment_13161" align="aligncenter" width="550"] Relativity of Markets on Different Time Frames -- 4-Hour[/caption]
[caption id="attachment_13162" align="aligncenter" width="550"] Relativity of Markets on Different Time Frames -- 15-Minute[/caption]
Yes, it can be confusing! This is one reason the new trader wants to select a space, create a trading profile, and work it.
Tip: You will ultimately want to consider multiple time frames in your analysis. But not right now. Learn a method for analyzing a single time frame first, and then adapt it to analyzing multiple time frames.