What are Forex Charts?
In technical analysis, we rely on forex charts to help us analyze price fluctuations in the market. Basically, there are three main types of charts that you will come across during the course of your Forex trading that you should know how to read: Line Charts, Bar Charts, and Candlestick Charts.
Line Charts
Line charts give us a quick overview of market trends. They also clearly identify two crucial pieces of information: support and resistance levels.
Our example clearly shows that the market is trending downward. It is because of their simplicity and clarity in giving a quick overview that this type of chart is popular among Forex traders.
Bar Charts
For more detailed pricing analysis, you can use a bar chart. A bar chart shows the highest and lowest price for a traded currency during the trading day. Instead of appearing as a point on the chart, the pricing data is depicted with a vertical bar. The top of the bar shows the highest price while the bottom of the bar shows the lowest price; the left side of the bar shows the opening price while the right side of the bar shows the closing price. Accordingly, a single bar like the one shown here (Show example Bar Chart 1) represents a trading day.
A typical bar chart for a trading period would actually look like this:
Candlestick Charts
Although candlesticks charts are similar to bar charts, they are more detailed in the information they display. Just like bar charts, which indicate the high and low price over a certain timeframe with a vertical line, candlestick charts also display the prices in the same manner. The top end of the line is known as the upper shadow while the bottom end of the line is known as the lower shadow—like the “wicks” of a candle.
The block at the center of the candlestick, known as the “real body,” shows the range between the opening and closing price. If the real body is dark or filled, the currency closed lower than the opening price.
Conversely, an unfilled real body indicates the opposite.
In other words, an unfilled real body indicates bullish price movements while a filled real body indicates a bearish market condition. For an unfilled real body, the top shadow shows the closing price while the bottom shadow shows the opening price. The opposite is true for a filled real body. You will get a clearer picture by studying the example of the candlestick chart we have just shown.
Among the types of charts we have mentioned here, candlesticks are the most popular charts among Forex traders as they are easy on the eyes and contain all the necessary price information. Their simplicity also gives a clearer picture of the trading conditions.
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