Forex ChartingReading Time: 3 Min Experience Level:Beginner
Chart Types in Forex
Line charts: This type is useful to get a quick view of price movements, trends, and support and resistance levels. It is simply a line that connects the closing prices of each period. Line charts do not show us what the high was, or the low, or even the open.
Traders who use line charts believe that the closing price is the most important of the day, and that focusing on changes in the closing price only removes the noise that the other prices produce (open, high, and low).
However, most traders use strategies that require other prices, like the high and low. That is why they prefer to use one of the next two chart types.
Bar charts: A little more complex than the line charts, bar charts show four prices, not just one. These are the open, the high, the low, and the close.
The vertical bar represents the pair’s trading range as a whole, whereas the bottom of the bar indicates the lowest traded price for that period (the low), and the top indicates the highest (the high).
Bar charts are sometimes referred to as (OHLC), meaning (open, high, low, and close).
Candlestick charts: Although candlesticks were used in Japan for at least two and a half centuries, they were not introduced to the rest of the world until the late 1980s, when Steve Nison first wrote about them. Candlestick charts show us the opening and closing prices, in addition to the highs and lows, but in a graphic format.
The body of the candlestick indicates the range between the opening and closing prices. The vertical lines show the high and low of a specified time, with the top vertical line being called the upper shadow and the bottom being called the lower shadow.
Candlestick bodies can either be filled or hollow. Generally speaking, if the body is filled (or black), then we can tell that the currency pair closed lower than it opened. If the body is left unfilled (or white), then we can tell that the currency closed higher than it opened. Modern charting applications use colors too. It is popular to use green for a rising candle and red for a falling candle.
To further explain, if the candlestick body is white or filled with a light color, the top of it indicates the close price, whereas the bottom indicates the open price. However, if the real body is black or filled with a dark color, then the top of the real body indicates the open price and the bottom indicates the close price. Bullish candlesticks are the white ones since they close higher than the open level, and the bearish candlesticks are the black ones since they close lower than the open level.