How to Read a Gold Chart
When it comes to trading the xauusd market the gold chart is the basic trading tool used by all traders. The gold chart will show information about a gold trading instrument - the gold chart will show the general direction of xauusd prices, the chart will also show the current price of gold and the chart will also explain the historical movement of chart xauusd prices.
Traders will use these charts to determine where to place trades. From the chart the trader will analyze the xauusd market movements using technical indicators so as to determine the direction of the market and determine the trade to open.
Traders must therefore learn how to use gold charts before they can start transacting in the online xauusd market.
The following are the various things that a trader will need to know about xauusd charts.
Types of Charts
There are three types of xauusd charts
Line Chart - this charting method draws a continuous line that connects the closing xauusd prices. For example if a trader is using the 5 minutes chart then this line chart will draw a continuous line that connects closing xauusd price of the xauusd market after every 5 minutes.
Bar Chart - This chart use bars to represent xauusd price movements, and plots OHCL - Opening xauusd price, High, Low, and Closing xauusd price for that period, for example if the period used is 5 minutes, the bar will represent the xauusd price data and the OHCL points for the 5 minutes.
Candle Stick Charts - The are the most popular chart types as they are the most visually appealing and they represent the xauusd price movements in an easily identifiable way which clearly show when a market moves up or when it moves down using different colors to differentiate the direction. These candlestick chart look like a candle and they have a body that resembles the wax part of a candle and an upper and a lower poking line that resembles the wick of a candle.
XAUUSD Chart Periods - Chart Timeframes
A gold chart will draw charts based on different time periods - these are 1 minute, 5 minute, 15 minute, 1 hour, 4 hour, 1 day, 1week and 1 month. The period used to draw chart data is also known as a xauusd chart time frame, for example the 5 min chart period is commonly referred to as the 5 min chart by trader. This 5 min chart time frame will represent data for the five minutes of trading, after those five minutes another set of data will be used to draw another chart representation. For examples if a trader is using candlesticks chart, the data of one candlestick will draw data of that five minutes, after those five minute another candle will be drawn using xauusd price data of the next five minutes - when these candles are combined they then make a graph representation that shows the general direction of xauusd prices commonly known as the trend. Traders can then use this information to make trading decisions.
Because the most commonly used charts are candlesticks charts we shall discuss how to read gold charts specifically candlestick charts.
How to Use Candlestick Charts
The candlestick charts uses candle that have different colors to represent different xauusd price moves, blue candles show xauusd prices closed higher than they opened, red candlesticks show xauusd prices closed lower than they opened. This color representation is then used by traders to determine when price has moved up or down.
The candle-sticks also show OHCL:
O - Opening Gold Price
H - Highest Gold Price
C - Closing Gold Price
L - Lowest Gold Price
These xauusd price points are represented using a formation which looks like a candle, the distance between the opening xauusd price and closing xauusd price is represented by what is referred to as the body, this part resembles the wax part of a candlestick. High xauusd price is represented by a poking line protruding upward, this line resembles the wick of a candle, the low xauusd price is represented by a poking line protruding downward and it also resembles a candlestick wick facing down.
Candlesticks
A trader can also add a gold indicator on the gold chart so that they can interpret the chart market using these indicators. Traders will need to place indicators on the gold trading so that they can get additional information about a gold trend & therefore be in a better position to make a more informed trading decision. These technical indicators can be used to predict the likely market direction that the xauusd market is likely to keep moving in whether up or down.
A trader can use indicators such as the moving averages and Bollinger to determine the trend. Traders can also use other indicators such as the RSI and stochastic oscillators to determine when to open trades.
Gold Trend lines are also used to determine the direction of the candlestick charts trends and these lines can drawn on the charts to show this direction. A upwards trend will be shown by a gold trend line is moving up while a gold trend that is moving down will b e shown a gold trend-line that is moving downwards.
To learn how to draw a gold trend line & how to trade using technical analysis a trader can learn about the trend line lesson under the learn gold trading lessons section of this website, for indicators a trader can learn about gold indicators & their technical analysis on the gold indicators section of this site.
