Technical Analysis - Types of Forex Charts

Charts are prices, plotted over one specific timeframe. Vertical axes represent the price of one given instrument, while the horizontal axis represents the time horizon.

The most common types of charts used by technical analysts are:

• Line chart
• Bar chart
• Candlestick chart

Line Chart

The line chart consists of dots connected by a line. These dots usually record the closing prices of currencies on one determined timeframe. 

The line charts are commonly used by traders whose main focus is to study only closing prices.

Bar Chart

The bar chart gives us more information regarding price at any given moment. It records the high, low, open and close price of one security during any given period.

The high and the low are represented by the top (high) and the bottom (low) of the vertical line. The open price is represented by the short horizontal line on the left, while the close price is represented by the short horizontal line on the right

On the chart above, every bar represents 30 minutes of price action. The top and bottom of each bar represent the highest and the lowest price of every period (30 minutes). The horizontal lines represent the open and the close of each 30 minutes bar

Candlestick Charts

Candlestick charts are very similar to the bar charts, they also record the open, close, high and low price of every period. The only difference is that candlesticks have a body on each bar.

Every “white” (or hollow) candlestick indicates that the price closed higher than where it opened. Thus the open price is the bottom of the body (not the whole candlestick), and the close price is the top of the body. In contrast, every black candlestick indicates that the price closed lower than where it opened. Thus the open price is the top of the body and the close price is at the bottom of the body.

The wicks above and below the body of the candlestick are called “shadows” or “wicks”, they represent the highest (upper wick) and the lowest (lower wick) price printed for each period. 

Candlestick charting has become very popular for traders. The main reason for this is because it is easier to read and study the relationship of prices (and investor’s psychology) on this type of charting.

Later in our courses we will see more about candlesticks, we will learn what each one of them represent as well as other patterns that could help us make a better trading decision. We will get to that!

Forex Charting

Introduction to Forex Charting
This part of the course is going to give you a brief overview of the three primary types of charts that you will run across in your Forex trading journey. The chart type that I use, and that my members use, is candlestick charts, I feel forex candlestick charts do the best job at showing the price dynamics in a market, since their design helps you to visualize the “force”, or lack thereof, that a particular price movement exhibited. So, let’s go over the three main types of charts that you will likely see as you trade the markets:
• Line charts
Line charts are good at giving you a quick view of overall market trend as well as support and resistance levels. They are not really practical to trade off of because you can’t see the individual price bars, but if you want to see the trend of the market in a clear manner, you should check out the line charts of your favorite markets from time to time.
Line charts are made by connecting a line from the high price of one period to the high price of the next, low to low, open to open, or close to close. By far, line charts that show a connection from one closing price to the next are the most useful and the most widely used; this is because the closing price of a market is deemed the most important, since it determines who won the battle between the bulls and the bears for that time period. Let’s look at an example of a daily line chart of the EURUSD:
• Bar charts
A bar chart shows us a price bar for each period of time. So if you are looking at a daily chart you will see a price bar for each day, a 4 hour chart will show you one price bar for each 4 hour period of time…etc. An individual price bar gives us four pieces of information that we can use to help us make our trading decisions: The open, high, low, and close, you will sometimes see bar charts called OHLC charts (open, high, low, close charts), here’s an example of one price bar:
Here’s an example of the same EURUSD chart we used for the line chart example but as a bar chart: