Forex Trading Charts

January 25th, 2010    Posted in Forex

Let me talk about the main instrument of trading that every trader is using every day – the charts. There are different types of charts but each of them show how the price changes over time. In case of Forex, they show the quote changes of a currency pair. There are 3 types of charts that are used most widely.

The Line Chart

As the name suggests, Line chart is simply a line indicating the closing price of the period. For example, on a 1 hour time frame chart, it shows the closing quotes for ever hour. The line chart can identify the trends but it’s not as informative to make forecasts.

The Bar Chart

The bar chart gives a lot more information because it show the low, high, opening and closing price for the period. The bar chart consists of bars with low and high notches. These notches show the low and high of the market during the period. This chart can identify not only the trends but also the change patters based on the lows and highs.

The Candlestick Chart

This chart is the most popular not only in Forex but in stock trading as well. It shows the same information as the bar charts but main difference is that it identifies the trends a lot easier. The candles are colored differenly in bullish and bearish markets so it’s easy to see immediately where the market is going. In case of other charts, we have to actually wait for the market to move for a while to see the same information.