Forex Broker Reviews and Ratings

The Different Types of Forex Charts

The Different Types of Forex Charts

Any trader worth their salt, regardless of trading strategy, would do well to familiarize themselves with forex chart reading.

Traders that rely on technical analysis, such as price charts, think that the patterns and graphs of market data reveal news, market mood, supply and demand, and other essential elements that influence the forex markets.

Learn more about the many forex chart styles and how to interpret them with this in-depth guide.

What does a price chart represent?

There are three types of charts that forex users rely on for trading: line charts, bar charts, and candlestick charts.

You can see price data and timeframes in any of these graphs. Typically, timeframes are horizontal (x-axis), while prices are vertical (y-axis). Units of time can range from seconds to minutes to hours to days. The majority of forex traders use one-minute and five-minute charts for transactions with shorter time frames, and fifteen-minute to one-hour charts for techniques with longer time frames.

3 Types of Price Charts

  • Line charts
  • Bar chart
  • Candlestick chart

Line charts

The most basic way to display price data in a market is with a line chart. On one side, we have prices, and on the other, time. The price is shown at various locations on the chart at different time intervals, and a straight line connects these spots.

In most cases, the price at the very end of the timeframe is used to generate the data at each point. In a 5-minute chart, for instance, the point would represent the price as at the conclusion of each 5-minute interval.

One limitation of line charts is their omission of data from the 5-minute intervals. The line chart would miss any substantial price movement within the specified timeframe.If you are looking for market direction information while trading indices or shares, these charts are perfect for you.

Bar chart

The vertical bars that make up a bar chart (or HLOC chart) are easily identifiable. Hi, low, open, and close is the acronym for HLOC. The vertical bars in this graph show different units of time. The period’s high is at the top of the bar, while its low is at the bottom. Additionally, there is a horizontal notch on both the left and right sides of each bar. In each bar, you can see the opening and closing prices for the given period; the former is on the left and the latter is on the right.

Price action trading strategies rely on this supplementary data since a pattern can be formed by combining bars, indicating a definite direction in which the market is heading.

One indicator of a possible decline is a sequence of shorter bars with progressively lower opening and closing notches, followed by a longer bar with both notches near the bottom. At the same time, a continuation of a trend may be shown by multiple bars of the same size and equally spaced opening and closing notches.

Bar charts with momentum-predicting overlays, such as Bollinger Bands or moving averages, are common among traders. These charts are well-liked by crypto traders as well as those in the foreign exchange market.

Candlestick chart

In addition to high, low, open, and close data, candlestick charts additionally give this information. Candlestick charts are popular among traders due to their reliance on bigger bars and colors, which make them easier to see. Candlesticks are the most common tool used to teach people how to read patterns on forex charts. Let me explain:

The bodies of candles are thicker. The open and shut are symbolized by the top and bottom of the body, respectively. The two wicks, which are commonly referred to as “shadows” by traders, emerge from the top and bottom of the body, respectively. The highs and lows of the period are symbolized by them.

Variegated candle colors When the market’s opening and closing prices are both lower, indicating an upward trend, white or light bodies indicate the same thing. If the close is lower than the open, and the bodies are dark, red, or solid, then the market is falling for the time.

In order to gauge market sentiment, traders keep an eye out for certain patterns or candles. A reversal in the market could be indicated, for instance, by a lengthy (dark-colored) downward-closing candle that does not have upward or downward shadows, followed by a short candle that opens and closes lower than the previous candle, with short shadows. This pattern can be confirmed by seeing a third candle that is the same size as the first candle and shuts up (light color).

Not one, but hundreds of different candlestick patterns One of the greatest ways to find out which patterns work best with your indicators is to back-test them using a powerful trading platform like MetaTrader 4.

Please find a list of the various forex trading charts, along with instructions, below.

Points and figures charts

When first beginning to analyze forex charts, many traders ignore this particular sort of chart. Yet, when combined with other kinds of charts, it can yield valuable information.

Although the x and y axes are identical to those of line charts, traders use “X” markings to indicate increasing prices and “O” marks to indicate decreasing prices in this type of graph. Multiple “Xs” and “Os” can be displayed vertically on the chart for each time unit. Price lows to highs throughout the specified time period are represented by the line.

Each line of Xs or Os would represent one day in the traditional point and figure charts used by traders for one-day timeframes. A point-and-figure chart is handy to traders wanting to hand-draw charts or acquire basic insights regarding intra-day price movement.

Mountain Chart

With the exception of shading the region under the price line a darker shade than the remainder of the chart, mountain charts are identical to line charts. Because it is more legible than a line graph, this layout is preferred by certain traders. Unfortunately, day traders shouldn’t rely on mountain charts because they don’t show price movement for each time unit. For the purpose of analyzing other charts or validating fundamental indicators, many traders utilize it to establish long-term trends.

Conclusion

Traders in the foreign exchange market (and other financial markets) have access to a wide variety of price charts. Reading forex charts can be intimidating, so it’s best to start easy. When you’re figuring out what kind of charts you like, strike a balance between having just enough data to make educated trades. The optimal setup varies from trader to trader, therefore, it’s wise to master the fundamentals before moving on to technical indicators.

Start your forex trading journey with GoDoCM. Read a GoDoCM review to see if it’s right for you.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top