In the world of Forex trading, one thing that you will always come across is the Forex chart. A Forex chart is essential for traders because it helps them predict the future price movements based on the past data. In this section, we shall discuss the different types of charts that you need to know and explain how you can look at the market in front of you and make your decisions.
Types of Charts
There are three different types of charts:
- Line chart
- Bar chart
- Candlesticks chart
We shall discuss them one by one in detail.
Watch the below video for further information on “Different Types of Charts”.
The line chart, in its simplest form, shows a line representing the closing point from one point to the next. In easy words, this chart draws a line from one closing price to the next closing price. When the two points are connected with a line, you can see the price movement of a currency pair over that period of time. When it comes to the line chart, there is no ambiguity whatsoever. However, this chart has some limitations. It can be difficult for you to determine the highest or lowest price in that time frame.
Bar charts are more descriptive than the line charts. The bars in this chart show you the opening price, high price, low price, and closing price. This is why these charts are also known as OHLC (Opening, High, Low, and Closing) Charts. A bar chart is a little more complex also because of all these details. The vertical bar denotes the currency pair’s trading range, the bottom of the vertical bar indicates the lowest traded price, the top of the bar indicates the highest price for that currency pair in that time period. The horizontal hash on the right side is the closing price while the same on the left side of the bar is the opening price. Moreover, a bar itself is the segment of time. It can be a day, a week, or an hour depending on the frequency you have selected.
Bar charts are made in two colors i.e. red and greed. The red chart indicates that the price has gone down while the green charts indicate that the price has gone up and closed on a high.
The most popular chart is the candlesticks chart. This type of Forex chart shows the same information as the bar chart. However, it is in a graphical format. The candlestick bars indicate the high to low range of the price with a vertical line. The interesting thing in the candlesticks chart is the body or the larger block in the middle, indicates the range between the opening and closing prices. The candles are also available or mostly displayed in two colors i.e. red and green. The red candles indicate that the price has closed on a low than its opening price and the green indicates higher closing.
The line charts are used to know about the current prices while the bar charts and candlesticks charts are used to learn about the price trends in the Forex market. We hope you enjoy learning about the different types of charts. Check out more Free & Premium Trading Indicators and boost your trading strategies with them.