How to Read Forex Charts to Build Better Trading Strategies
Market News
September 19, 2025
Knowing how to read forex charts is the first step toward becoming a skilled trader. Charts show you how prices move. They help you spot trends, track momentum, and build better strategies. Without charts, trading is blind guesswork. With them, you can see what buyers and sellers are doing and plan with confidence.
This guide will explain how to read forex charts in a simple way. You’ll learn the main chart types, trading chart patterns, timeframes, and signals. You’ll also see how to use forex trading charts to build a clear forex trading plan. Chart reading is a skill every trader needs. We explained why in prop trading vs traditional trading.
Why You Must Learn How to Read Forex Charts
Every trader depends on charts. The vertical axis shows price, while the horizontal axis shows time. Each forex trading chart condenses market activity into one picture.
If you don’t know how to read forex trading charts, you’ll miss clear signs of market direction. You won’t notice where price slows, where it reverses, or when momentum builds. On the other hand, if you do know, you can spot strong setups with better odds and avoid risky entries. Learning how to analyse forex market always begins with reading charts because they reveal what buyers and sellers are doing in real time.
Main Types of Forex Trading Charts
There are different ways to view price. Each forex trading chart has its strengths and weaknesses. Knowing which one to use depends on what you want to see. Charts also look different on each platform. To compare them, see our breakdown of Match Trader vs cTrader vs TradeLocker.
1. Line Chart
The line chart connects closing prices over time. It’s the simplest chart.
Strengths: Easy to read. Good for seeing overall trend.
Weakness: Hides details like highs, lows, and swings.
Use line charts when you want a broad view of the forex market.
2. Bar Chart (OHLC)
A bar chart, also called OHLC, shows four prices: open, high, low, and close.
Vertical line = range
Left tick = open
Right tick = close
Strengths: Shows volatility and range.
Weakness: Less visual than candlesticks.
This forex trading chart is useful when you want detail beyond simple direction.
3. Candlestick Chart
Candlestick charts are the most popular. They also show open, high, low, and close, but in a clear block format.
The body = open to close
The wicks = high and low
Green body = bullish close
Red body = bearish close
Strengths: Visual and easy to read. Supports many trading chart patterns.
Weakness: Can show too much noise on short timeframes.
Candlestick charts are the standard tool for most traders learning how to read forex trading charts.
4. Mountain Chart
A mountain chart is like a line chart, but shaded underneath.
Strengths: Clean and simple. Good for long-term views.
Weakness: Hides key price action.
Mountain charts are less common but still appear on some platforms.
Choosing the Right Timeframe
A forex trading chart is only useful if you pick the right timeframe.
1-minute to 5-minute: Good for scalping. Fast moves, high noise.
15-minute to 1-hour: Popular for day trading. Balance of detail and clarity.
4-hour to daily: Best for swing trading. Less noise, shows trend strength.
Weekly to monthly: Used for long-term strategies. Focused on big picture.
Remember: signals on higher timeframes are stronger than those on lower ones. If you want to know how to analyse forex market with precision, always check the bigger trend first. Risk control is just as important as reading charts. Our blog on margin vs leverage explains how to balance chart setups with account safety.
Candlestick Signals Every Forex Trader Should Know
Candlesticks reveal sentiment. A few key signals show who has control.
Doji: Open and close are almost equal. Shows indecision. If found in a trend, may point to reversal.
Hammer: Small body, long lower wick. Found at bottom of a downtrend. Buyers pushing back.
Shooting Star: Small body, long upper wick. Found at top of an uptrend. Sellers taking over.
Engulfing Pattern: One large candle covers the one before it. Strong sign of reversal.
If you’re learning how to read forex charts, these signals give a strong starting point.
Trading Chart Patterns to Learn
Beyond single candles, you must study trading chart patterns. These show whether a trend may continue or reverse.
Reversal Patterns
Head and Shoulders: Signals a top.
Double Top / Double Bottom: Price tests same level twice. Often means reversal is near.
Continuation Patterns
Flags: Short pause, then trend resumes.
Triangles: Price tightens into a point. Breakout often follows.
Trading chart patterns are tools. They don’t guarantee outcomes, but they increase your odds.
Support and Resistance Levels
Support is where price often stops falling. Resistance is where it often stops rising. These levels mark supply and demand in the market.
When support breaks, price often falls further because buyers step aside. When resistance breaks, price often climbs higher because sellers lose control. The more times a level is tested, the stronger it becomes. If you’re learning how to read forex trading charts, you must watch how price behaves around these areas to understand where momentum may shift.
How to Analyse Forex Market Using Charts
Image brief: Step-by-step infographic showing the five parts of chart analysis (trend, levels, signals, patterns, plan) with icons or simple visuals for each step.
Learning how to analyse forex market is about combining clues. Charts show you what’s happening. Strategy tells you what to do.
Here’s a simple process:
Check trend on higher timeframe forex trading charts. Start with daily or weekly to see the bigger picture.
Mark support and resistance zones where price has reacted before. These are key decision points.
Look for candlestick signals near those zones to judge who controls the market.
Confirm with trading chart patterns like flags or triangles to see if a move may continue.
Plan entry, stop loss, and target before placing any trade so risk is clear.
This mix of structure and signals is the core of technical trading. It keeps you from guessing and helps you act with a clear plan.
How to Analyse Forex Market Using Charts
Learning how to analyse forex market is about combining clues. Charts show you what’s happening. Strategy tells you what to do.
Here’s a simple process:
Check trend on higher timeframe forex trading charts. Start with daily or weekly to see the bigger picture.
Mark support and resistance zones where price has reacted before. These are key decision points.
Look for candlestick signals near those zones to judge who controls the market.
Confirm with trading chart patterns like flags or triangles to see if a move may continue.
Plan entry, stop loss, and target before placing any trade so risk is clear.
This mix of structure and signals is the core of technical trading. It keeps you from guessing and helps you act with a clear plan.
Example Trade: EUR/USD
Imagine EUR/USD is in an uptrend on the daily chart. You switch to the 1-hour forex trading chart and see a flag pattern forming near support. A bullish candlestick closes above the flag, showing that buyers are ready to continue the move.
Plan: Buy entry above the breakout. Place stop loss below support to limit risk. Set a target equal to the flag’s height or trail stops to ride a longer trend.
This shows how to read forex charts in a practical way by linking trend, pattern, and risk control into one trade idea. If you want to see which pairs offer the cleanest moves, check out our guide on the best forex pairs to trade.
Example Trade: Gold (XAU/USD)
Gold is holding above $1900. On the 4-hour chart, you see a hammer candlestick forming right at support. Buyers are stepping in, showing strength at a key level.
Plan: Take a long position as price confirms the bounce. Place stop just below $1900 to control risk. Set a target at the next resistance or scale out as price moves higher. You can also trail the stop if momentum continues.
This is a real example of using forex trading charts to act with a plan by combining support, candlestick signals, and clear risk management.
Avoiding Mistakes When Reading Forex Trading Charts
Even skilled traders make errors with charts. Common mistakes can cost money and create doubt.
Switching timeframes too often. Creates confusion and weakens conviction. Pick a few and stick with them.
Forcing patterns where none exist. Wait for clear signals instead of chasing shapes that aren’t there.
Ignoring context. A hammer in a sideways market is weak, but in a strong trend it can matter.
Cluttering charts with too many indicators. Keep it clean so price action stands out.
The goal is clarity. Forex trading charts should guide decisions, not overwhelm you. When charts are simple, you can focus on trend, levels, and risk control.
Practice First With Demo Accounts
If you’re learning how to read forex trading charts, start with a demo. Practice spotting candlestick signals, trading chart patterns, and support zones.
For example, open a demo EUR/USD chart on the 1-hour timeframe. Mark support and resistance levels, then wait for a candlestick pattern like a hammer or engulfing candle to form near one of those levels. Place a small test trade with a clear stop loss and target.
Use these practice sessions to sharpen your eye. Over time, you’ll learn how to analyse forex market with more confidence and test strategies without risking real money.
Building Strategies With Forex Trading Charts
A good strategy blends chart reading with discipline. Here’s how to build one:
Use higher timeframes to find trend. For example, check the daily chart to confirm if EUR/USD is trending up.
Drop to lower timeframes to spot entry. A 1-hour flag or triangle can give a clear signal.
Confirm with trading chart patterns. Wait for a breakout candle that supports the bigger trend.
Place stop loss before entering. If you buy EUR/USD at 1.0850, put your stop just below support at 1.0820.
Stick to your risk rules. If your plan is to risk 1% per trade, follow it every time.
When you know how to read forex charts, strategies become clear. The chart shows setups, your plan decides action, and real examples guide your confidence.
Get Funded and Trade Smarter With Pipstone Capital
Learning how to read forex charts is the foundation of trading. It shows you how to analyse forex market trends, spot trading chart patterns, and act with structure. With practice, forex trading charts become your guide for every trade.
At Pipstone Capital, you can apply what you’ve learned with real funding. Our raw spreads and fast execution make chart-based strategies more effective. Traders can access up to $400,000 in funding and keep 90% of profits. There’s no time limit on challenges, so you can wait for the right chart setups. Payouts are processed in 24 hours, and trading during news events is allowed, giving you full freedom to use your chart analysis. If you want to see how funding works, read our post on what is a funded account in trading.
We built Pipstone to help traders succeed, not fail. If you want to put your chart skills into practice, Pipstone Capital gives you the tools and support to grow.
