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There are a number of different tools in the forex trader’s toolbox and one of the most important important is the forex chart. In its simplest form, a forex chart is a graph of the performance of a currency pair over a set time period. Reading a forex chart is central to any trader’s business and so it is important to be able to read them and to understand just what they mean.

A forex chart is plotted for a single currency pair such as the EUR/USD or AUD/CAD and shows the movement of the currencies concerned against each other over time. For instance, a EUR/USD chart shows you how the US dollar and Euro have moved against each other over the period for which the chart has been drawn.

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In the 1930s, Ralph Nelson Elliott, a corporate accountant by profession, studied price movements in the financial markets and observed that certain patterns repeat themselves. He offered proof of his discovery by making astonishingly accurate stock market forecasts. What appears random and unrelated, Elliott said, will actually trace out a recognizable pattern once you learn what to look for. Elliott called his discovery “The Elliott Wave Principle,” and its implications were huge. He had identified the common link that drives the trends in human affairs, from financial markets to fashion, from politics to popular culture.

Robert Prechter, Jr., president of Elliott Wave International, resurrected the Wave Principle from near obscurity in 1976 when he discovered the complete body of R.N. Elliott’s work in the New York Library. Robert Prechter, Jr. and A.J. Frost published Elliott Wave Principle in 1978. The book received enthusiastic reviews and became a Wall Street bestseller. In Elliott Wave Principle, Prechter and Frost’s forecast called for a roaring bull market in the 1980s, to be followed by a record bear market. Needless to say, knowledge of the Wave Principle among private and professional investors grew dramatically in the 1980s.

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