Three Types Of Forex Charts Every Trader Needs To Know

By Steven Hatzakis Friday, January 5, 2018
There are many types of Forex charts you need to know and be able to read if you want to be a Forex trader and make a profit from the virtual money market.

Introduction

Before starting Forex Trading, one thing you should remember is to learn the basics of Forex first and foremost. It is helpful for you to be easier to get close to the information. So, the today’s post will cover a very fundamental topic that every Forex trader must understand fully. That is the Forex charts.

In particular, we will show you three main types of charts you have to read for Forex trading, the differences between them, as well as how to read them!

What Is a Forex Chart?

A Forex chart is a graphical depiction of a sequence of the exchange rate between currency pair over a given time frame. It can be used to represent different currency pairs such as EUR/USD, GBP/USD, AUD/CAD, NZD/JPY, etc.

How Many Types of Forex Charts

There are three most popular types of Forex charts you should know. Now let’s move on to discover more details:

Line Charts

As you can see, the name of this chart tells everything about its shape. A simple line chart is a chart that plots a line from one closing price to the next one. So, easy and simple to recognize, right?

It is obvious to infer the movement of the exchange rate of a currency pair over a period from the line of the chart.
http://www.forexvps.com.my/wp-content/uploads/2016/08/line-chart.gif
Because of its simplicity, it does not provide enough information for traders. This is the reason why most traders do not choose to use a line chart.

Bar Charts

Although the name is a bar chart, it not a chart at a bar.

This kind of chart is more complicated than line chart. It represents not only the opening and closing prices but also the highs and lows of a pair in a period.

In general, the vertical bar implies the trading range of currency pair. The top of the vertical bar demonstrates the highest price, while the bottom of the bar indicates the lowest price. The left horizontal dash of the bar indicates the opening price, and the right-side dash shows the closing price.
For example, a bar chart for EUR/USD might look like this:

http://www.forexvps.com.my/wp-content/uploads/2016/08/bar-chart.jpg
Another name of bar charts is “OHLC” charts. Letter “O” represents the Open. Those letters “H”, “L”, “C” defines the High, the Low, and the Close in turn.

Take notice that, the word “bar” is a part of data on a chart. In addition, it implies a segment of time such as a day or one week and even one hour. When you encounter the word “bar”, be sure you understand that we are referring to the time frame.

As you can see, the bar chart gives you more information on a currency than the line chart.
Notwithstanding, many investors do not easily track bar prices, especially when zooming in. So, this is the candlestick chart appears.

Candlestick charts

The last type of Forex chart is candlestick charts – the most popular choice. Do not be confused if you hear the name Japanese candlestick chart which is from ancient Japan because they are only one.

A candlestick chart is similar to “OHLC” bar graph. However, most investors prefer to look at the candlestick chart. They have long dashes showing open and close prices, which makes it easier for investors to view the entry and exit prices.

Candlestick bars show the high-to-low price with a vertical line. Nevertheless, its body which is drawn as a block in the middle illustrates the range between the entry and exit prices.

In fact, you can see there are two kinds of bar graphs. One is in white and the other is colored in. Normally, a filled block usually shows up as the entry price is higher than exit price. It is not always black and white, and sometimes, it is colored, such as green and red.

Looking at the following example, it helps you have a clear mindset about filled and unfilled body of candlestick chart. If the opening price is higher than the closing one, the block is turned on black in this case and vice versa.
http://www.forexvps.com.my/wp-content/uploads/2016/08/candlestick-analysis.jpg

Benefits of candlestick chart:

  • * Be easy to interpret
  • * Be suitable for beginners to start studying and practicing Forex chart analysis
  • * Be clearly obvious information within the bar notation
  • * Have a cool name like the “shooting star” so as to simply remember candlesticks patterns. 
  • * Be good at distinguishing market turning points – reversals. You will discover more about this later

Conclusion

Hopefully, this post has provided you with enough information about most-used Forex charts. Now you equip yourself with another great weapon to give you a right start in Forex trading. Thank you for reading!
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