In technical analysis, a chart will help you make an informed decision quickly and it offers you a unique perspective on the market action. In this article we’re going to look into the most popular types of charts in Forex trading which are as follows:
- Line Charts;
- Bar Charts;
- Candlestick Charts;
Line charts are drawn by simply connecting the session open, high, low, or closing prices in one single line. Usually, the line charts are drawn by using the closing price which is regarded as being the most important price out of the four prices. The main advantage of this type chart is that it’s extremely clean, it filters out a lot of market noise and gives clear support and resistance levels.
Bar Charts show us the open, close, low and high prices for each given session. The horizontal line on the left shows the opening price, the bottom of the vertical line shows the lowest price of that specific time frame. The top of the line shows the highest price for that specific time period. The horizontal line on the right shows the closing price. This is the most popular type of chart. In most of the trading literature, you’ll find charts being displayed as Bar charts.
Candlestick charts display the same information as Bar charts, but the visual representation is a lot better and is easier to interpret. The big blocks are called the body of the candles and the vertical lines above and below the body are called wicks. The vertical lines above the blocks are also called the upper shadows and the lines below are called lower shadows.
When the candlestick closes above its opening price we formed an up candle or a bullish candlestick. Conversely, when the candlestick closes below its opening price we formed a down-candle or a bearish candlestick. The main advantage over any other charting technique is the excellent visual representation that the candlesticks provide, it shows clearly who is in control, bulls or bears. Each candlestick represents a particular time frame.
We can’t say that any chart type is better than another. As a beginner, it’s best to stick with candlestick charts which will enhance your trading experience.
Keep reading: continue to Charts – part 2 about Chart patterns.