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 xauusd chart will show information about a xauusd instrument - the gold chart will show the general direction of gold prices, the chart will also show the current price of a gold and the chart will also show the historical movement of chart gold 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 xauusd charts before they can start transacting in the online gold 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 gold charts
Line Chart - this charting method draws a continuous line that connects the closing gold prices. For example if a trader is using the 5 minutes chart then this line chart will draw a continuous line that connects closing gold price of the xauusd market after every 5 minutes.
Bar Chart - This chart use bars to represent gold price movements, and plots OHCL - Opening gold price, High, Low, and Closing gold price for that period, for example if the period used is 5 minutes, the bar will represent the gold price data and the OHCL points for the 5 minutes.
Candlestick Charts - The are the most popular chart types as they are the most visually appealing and they represent the gold 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.
Gold Chart Periods - Chart Timeframes
A xauusd 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 referred to as a xauusd chart timeframe, for example the 5 minute chart period is commonly referred to as the 5 minute chart by trader. This 5 minute chart timeframe 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 example if a trader is using candles chart, the data of one candle-stick will draw data of that five minutes, after those five minute another candle will be drawn using gold price data of the next five minutes - when these candles are combined they then make a graph representation that shows the general direction of gold 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 xauusd charts specifically candlestick charts.
How to Use Candlestick Charts
The candlestick charts uses candlestick that have different colors to represent different gold price moves, blue candlesticks show gold prices closed higher than they opened, red candles show gold prices closed lower than they opened. This color representation is then used by traders to determine when price has moved up or down.
The candlesticks also show OHCL:
O - Opening XAUUSD Price
H - Highest XAUUSD Price
C - Closing XAUUSD Price
L - Lowest XAUUSD Price
These gold price points are represented using a formation which looks like a candlestick, the distance between the opening gold price & closing gold price is represented by what is referred to as body, this part resembles the wax part of a candle. The high gold price is represented by a poking line protruding upward, this line resembles the wick of a candlestick, the low gold price is represented by a poking line protruding downward & it also looks like a candle wick facing down.
Candlesticks
A trader can also add a xauusd indicator on the gold chart so that they can interpret the chart market using these indicators. Traders will need to place indicators on the xauusd so that they can get additional information about a xauusd trend and 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.
XAUUSD Trend lines are also used to determine the direction of the candlestick charts trends and these lines canbe drawn on the charts to show this direction. A upward trend will be shown by a xauusd trend line is moving up while a xauusd trend that is moving down will b e shown a xauusd trend-line that is moving downward.
To learn how to draw a xauusd trend line & how to trade using technical analysis a trader can learn about the trend line lesson under the learn xauusd lessons section of this website, for indicators a trader can learn about xauusd indicators and their technical analysis on the xauusd indicators section of this website.
