This one goes for Forex newbies, today we look at the three most popular types of Forex trading charts:
Of all the Charts out there, line charts, bar charts, and candlestick charts are the most popular ones
Now that you know the different charts, let’s get to the importance of each.
This chart, is a simple line chart which is actually a line from one closing price to the next closing price. When strung together with a line, from these one can see general price movement of a currency pair over a period of time.
A very simple version of these charts draws a line that connects all of the various closing prices. The line chart is a great indicator of the price movement of a pair of currencies over time.
Here is an example line chart:
The bar chart is a little more complex than the Line chart. Here it helps one notice the opening and closing prices of currency pairs, as well as the highs and lows. The bottom of the vertical bar indicates the lowest traded price for that time period, while the top of the bar indicates the highest price paid.
This chart chart has a little more to it. Bar charts show both the opening and the closing prices of the market each day, the highs and the lows. The bottom part of the bar is the lowest price of a given time and the top is the highest.
The actual bar shows the whole range for any given time.
The small horizontal mark on the left of the bar is the opening price and the one to the right is the closing one.
Here is an example of a EUR/USD bar chart:
Remember that through all of the lessons to come, the word ‘bar’ will stand for a single unit of data on a chart.
Each bar is a simple segment of time, it could be a day or an hour. When you see the word ‘bar’ mentioned, make sure you understand what time frame it is being used in. OHLC charts are another name for bar charts. They have this name because they keep track of the opening price – the high, the low, and the closing price.
Open: The line to the left of the bar is the opening price. High: The very top of the bar is the overall high for that time frame. Low: The lowest point of the bar is the overall low for that time frame. Close: The little line off to the right is the closing price for that time frame.
And Finally Candlestick Charts?
The Candlestick charts show similar information as a bar chart, but in a prettier, more graphic style.
Candlestick charts are basically an enhanced version of a bar chart.
They indicate all of the same things that bar charts do – a high, a low, and the opening and closing prices.
The actual body of the candlestick shows the opening and closing prices. If the body is black, the opening was higher than the closing. If it is empty, then the opening price was lower than the closing.
So, if the body is black then the top line of the body is the opening price and the bottom is the closing. If it is clear or white, then the bottom is the opening and the top is the closing.
Candlesticks show high and low prices with upper and lower vertical lines, also known as shadows. The upper shadow or the top vertical line, is the high for the time frame, and the lower vertical line or the lower shadow, is the low for the time frame.