Forex trading involves a lot of charts. So if you want to get into foreign currency trading, you will have to get familiarized with the different types of chars in trading. Learn trading charts in Forex by continue reading below. In this guide, you will learn about the three most popular types of charts. These are the line charts, the bar charts, and the candlestick charts. Let’s discuss these three charts further.
- 1. Line Charts
Like the line charts you’ve probably used in presentations and such, the line charts in Forex is most likely the same. This is just a simple line chart that draws a line from the first closing price of the period up to the following closing prices until the end of the period or the end of the scope of the line chart. Simply put, just plot the closing prices of each closing period then connect the dots! For example, you want to make a line chart for the past 10 days. So just create 10 dots or points representing the amount for the closing price for that period. Then connect the dots with a line and you’ll see the general price movement of a currency pair over a certain period.
- 2. Bar Charts
Like the line charts, you’re probably familiar with the bar charts. This type of chart is very popular in presentations and reports as well. Like the line charts, bar charts also feature the closing prices. At the same time, it can also show the opening prices and even the highs and lows. How can it fit all those information in a single bar? Here’s how these points are represented in a bar chart. The bottom of the vertical bar represents the lowest traded price during that period. On the other hand, the highest price paid is represented by the top of the bar. Thus, the vertical bar represents the trading range of a currency pair as a whole. On the other hand, the horizontal hash you can see on the left side of the bar represents the opening price. The closing price is represented by the right-side horizontal hash. Note that each bar represents only one segment of time. It can be a day, an hour, or a week depending on what time frame you use for your charts. Bar charts are also known as OHLC charts because it features the Open, Highs, Lows, and the Close for the currency pair.
- 3. Candlestick Charts
Lastly, the candlestick chart is the most graphic and most complex chart of the three. Simply put, it’s just a bar chart only that it is more graphic and prettier in format. The vertical lines still represent the highs and the lows. However, the larger block in the middle represents the difference between the opening and closing prices. So normally, if the block in the middle is filled or shaded, then the currency closed lower than it opened. So if the closing price is higher than the opening price, then the middle block will be unfilled, white, or hollow. The candlestick charts are simply just like the bar charts or the OHLC charts. The only different thing is that they are colour and they serve as a visual aid. They are easier on the eyes and easier to interpret.
Sam is free lancer content builder for many sites as well as magazines. He writes many articles on finance, insurance, trading mostly his articles published on forex. Now he is busy to writes on trading charts in forex.