Forex charting software is a computer program which helps Forex traders compare the price of currency pairs using different trading indicators. The most popular technical indicators include moving averages, Bollinger bands, Fibonacci retracement and relative strength index (RSI).
The practice of studying charts and patterns is known as technical analysis and has long been used by traders to analyze the currency markets and find indications about the future performance of a currency pair.
Identifying trade signals and price patterns may seem confusing at the beginning. There are excellent online courses, tutorials, and books on technical analysis essential for those learning charting as part of their trading education. To help you quickly identify the best Forex online learning resources including charting, you can read our Axcess FX article, the 15 best resources to learn Forex online.
Charting Software As Part Of A Trading Strategy
Charting software helps traders undertake technical analysis and is a vital tool in implementing a successful Forex trading strategy.
Focusing on one specific trading approach using charts and implementing it into a disciplined strategy is recommended.
Simulated paper trading can be employed to help traders understand how technical trading indicators identified as part of their strategy behave in live markets. From charts, beginner traders may choose to paper trade a simple crossover strategy tracking two moving averages on a currency pair.
Seven Key Advantages Of Using Forex Charting Software
We have identified seven of the advantages for using Forex charting software. They are not in order of importance, but looking through them will make you aware of the benefits.
A visual representation of market data: It can be challenging analyzing market data to identify potential trades. Charting software though, offers a clear visual representation of trends, patterns and price movements.
Real-time data and analysis: Forex trading software can provide live price feeds to charts, analytics and market data which is crucial for permitting traders to make accurate decisions from up-to-date market conditions and trends.
Historical data analytics: As well as live data, charting software enables Forex traders to access historical data that:
- Allows predictions based on historical price movements
- Identifies recurring patterns
- Reviews previous market behavior
Historical data is also used by Forex traders for backtesting and strategy testing.
Customizable technical indicators: Using Forex charting software means popular technical indicators like RSI and Bollinger Bands can be added on to charts and customized to align with specific trading strategies, facilitating decision making.
Advanced drawing tools: Advanced drawing tools available through charting software allow Forex traders to mark price points, create visual analysis and forecast possible reversals. Chart drawing tools include:
- Trendlines
- Fibonacci retracements
- Channels
Alerts and Notifications: Specific price levels can be set up with an alert by FX traders using charting software. Once an alert is activated, traders are notified when set criteria are met, for example a moving average cross over or divergence (MACD). A trader can then take any necessary action without constantly monitoring the market.
Multiple time frame analysis: The seventh advantage of using charting software for Forex trading is the ability to analyze charts on multiple time frames. Time frames range from minutes and hours to daily and weekly.
Analyzing different time frames allows traders to get a broad perspective of current trends and hone trading strategies to preferred short term or long term goals.
If you are at the beginning of your charting journey, you may find the below video on how to read charts fast, useful to get you on the right path:
Should You Invest In Paid For Charting Software?
Most online Forex brokers offer free charting software to support your trading activities when you open an account on their Forex trading platform. The MetaTrader platform, which is popular with online brokers, offers free charting software.
There can be limitations to using free chart software however, like a limit on live data feeds or reduced access to strategy testing. Many traders, therefore prefer to use their own charting software purchased independently rather than that offered by their online broker.
If you are thinking of investing in independent Forex charting software, it is vital to first read online reviews to get informed independent feedback before committing. We have a detailed guide where you can read further about the benefits of reviews and how they will help you decide on the appropriate charting and technical analysis software.
What Constitutes Good Charting Software?
Proper technical analysis focused software should have interactive charting features allowing you to work to implement a charting strategy as part of your broader trading system.
Features must include technical indicators, including moving averages and oscillators and also patterns such as shapes and trendlines. Charts will include bar and candlestick charts and opening and closing prices. Time frames vary from a minute up to multi-year intervals. Traders usually employ candlestick charting as it displays the broadest amount of data.
The following software development companies offer good FX charting software:
- MultiCharts
- eSignal
- Trend Spider
- Trading View
- MetaTrader Charts
We have an informative resource that looks at the best charting software that will help you further make an informed decision on the best option for you.
Takeaway thoughts
In this article, we have provided a high level overview of what is Forex charting software, including its advantages compared to not using it, what constitutes good charting software and whether you should invest in a paid rather than free solution.
If you are considering purchasing charting software, make sure it has useful support features, including guidance and support for trading on the Forex market, and the possibility to ask questions about using the software’s features and technical support, through either chat, email or voice.
Written by Chris Gillie
Chris Gillie is the founder of Axcess FX, a Forex software research and review website. He is a former investment banker who worked in FX Sales on the UBS London trading floor. Chris has been using Forex trading software as part of his trading set-up since the late 2000s and the embryonic days of MetaTrader and the MQL coding language.
