Types of Charts
Forex trading for beginners can be daunting for anyone initially, especially with the many different types of charts and ways to execute the trade.
With that said, there are 3 common types of charts that have been adopted globally with forex trading.
- Candlestick Charts
- Bar Charts
- Line Charts
- Point and Figure Charts
Each has different advantages and disadvantages but also based on personal preference.
The candlestick chart is by far the most popular chart across the industry.
It is visually simple and easy to identify key areas of the market at a glance.
This is the set up we would use to find candlestick patterns and chart patterns.
Candlestick charts will print the open, high, close and low of each forex trading session.
This is really important as we are able to generate an idea of how the previous session did instantly.
As you can see from the chart above that it is a very colourful chart and easy to see whether the market is going up or down.
The key reasons to use the candlestick as a type of chart is because of it’s coloured in the body – can you see the red and green candlesticks? They are called the body’s and it gives us a clear indicator of a sudden or sharp movement of price. The longer the body, the sharper the price has risen or fallen.
Here we show you what a candlestick body means.
As you can see the main difference is the open and close pricing. This is why the candlestick body is very helpful as we can quickly analyse that red means down and green means up.
The bar chart is similar to the candlestick chart but instead of filling in the body between the open and close price, it maintains the thin line. The bar chart still identifies the key bits of information required for at a glance
Similar to the candlestick chart, the bar chart also demonstrates the open, high, low and close. Yet, with a less distinctive body.
The line chart is the most basic type of chart available because it only plots the close price of the asset. Whereas the bar and candlestick, the chart shows you the open price, low price and high price of the trading session.
Line charts are very useful though, we will show you the key benefits in using these charts from time to time.
The key aspect of the line chart is that it will quickly show you where the close price was and show you a quick idea of whether the asset is trending or not.