Charts are very important for a person who is starting to trade gold on the Forex markets because they give him or her an estimate regarding where the price will be at a certain time and whether or not there is going to be any seasonal downturn. There are a few different types of charts and chart patterns that a trader is able to use to give indications with regards to stop-losses and when trades need to occur.
This is the most basic type of chart because it only shows a trader the ending price of the product in a given time frame. It does not show the high price of the gold or the low price during a period, simply the price at which the gold was located at the end of the trading period.
A bar chart is very similar to that of a line chart except it includes more important information. This is when each point of the line chart is expanded to a bar that shows the highest price that the gold was at during a given period, the lowest price that the gold was at, and the opening and closing prices. The opening price for gold will be represented by a dash that is on the left of the vertical bar representing the high and low price of the day and the closing price will be located on the right of the vertical bar. If the bar is a red color, then that means that the opening price was lower than the closing price. A positive price change is represented by any other color, usually either blue or black.
Like the bar chart, each point on the candlestick chart will be a vertical line, rather than a single point. However, the vertical line will be expanded in order to show the difference between the opening price and the closing price. Also similar to the bar chart, the candlestick chart for gold prices will use colors to represent what happened during the course of the trading day. If the candlestick bar is red, then the opening price is higher than the closing price of the day. Any other color represents the situation where the opening price is lower than the closing price. There are the most variations of the candlestick chart, so it is important to understand exactly how the chart works.
Gaps happen when the closing price for gold is a great deal higher or a great deal lower than the starting price for the day. As soon as a gap occurs, the newest price represents that a new price level has been reached. When there is a gap, there is a high chance that the trend will continue in whichever direction that the gap has resulted in. For example, whatever forces drove the price up so that there is a gap will continue to act on the price in the same way. Whatever drives the price down will result in the same phenomenon.
Head and Shoulders:
This is a chart that matches the top of a price target and the lower end of a price target. When a head and shoulders pattern is created, then that means that there is an uptrend that has risen even further to create a left shoulder. Prices may move lower but will always go back up in order for the head to be created. As soon as the head appears, if the prices lower, they will not lower to the point where they will go below the price level of the left shoulder. They might go up again, but they will not go higher than the price of the right shoulder. As soon as the pattern goes against the neckline, then the head and shoulders pattern has been completed.
This is a version of the head and shoulders chart pattern, except it seems to be expanded. The head and shoulders will each occur at three separate points at three separate prices.
Saucers are a pattern that goes for an extended period of time and starts with a downwards trend that goes into a sideways trend and eventually resolves into an upwards trend. Because this chart pattern is such an extensive one, it indicates a solid change in the overall trend for the price of gold.
Triangles are when the price for a commodity jumps or falls by an extensive degree within a short period of time and then slowly goes in the opposite direction of the jump so that a triangle is formed.
How to Trade Gold Online
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The broker trading platform will also provide you with numerous charting tools and the ability to trade other commodities and currencies in addition to gold CFD’s. You might also want to begin trading with a demo account before attempting to risk any of your own money. That way you can practice trading with virtual money on the demo platform first.