Types of Forex Charts
Now some of this will be really basic and will probably remind you of when you were in your maths class a long time ago. However, it is important that you understand the different types of chart as this is what most people trade from.
There are three types of chart/graph offered on most trading platforms:
- Line chart
- Bar chart
- Candlestick chart
Ok most people will have heard of the first two as they are very common and were probably taught in a basic maths class at school.
Line Chart
A line chart is made up of a series of dots connected in a horizontal line. So if we take a daily chart, the end of day price is joined to the next and so on until you see the line chart.
This is simple and very straightforward and gives a good idea of where the currency is generally moving. However, it only tells you what happened at that specific time. It does not tell you what happened intraday etc.
Bar Charts
Now these look slightly different from what you would have seen in school.
In Forex, a bar chart is made up of a series of bars. These bars show opening price, closing price, as well as the high and low for the period of the bar. The top of the bar is the highest point the price reached and the bottom shows the lowest price that bar fell. The dash on the left shows the price the bar opened and the dash on the right shows the price the bar closed.
Bar charts are also known as OHCL charts. This is just a simple way to remember how the bar should look as it stands for Open, High, Close, Low.
Already it can be seen that Bar charts provide a better way to look at what is happening with the currency, compared with Line charts.
Candlestick Charts
Candlesticks came from Japan and as a Forex ninja they are our friends. This is because the Candlestick is very similar to the Bar, discussed above, however, it is easier to see as it is in a more friendly format.
Candlesticks have bodies unlike bars. Where the open dash and close dash are on a Bar, this is where the Candlestick body is. It makes it a lot easier to see where the candle opened and closed and also if it increased in price or decreased, by changing the colour of the body of the candle. It is common practice to change the colour of a Candlesticks body to make it better to see, if it was an up bar or a down bar. It is up to the user of the charts to decide on this but the most commonly used colours are black and white, or green and red.
Candlesticks can show a lot of information and will be discussed in more detail further in the education section. This is just a small introduction to the Candlestick to familiarise yourself with them and it’s probably best to get used to seeing them as they are a major tool used in assessing price.
