Forex charts are tools used to study price changes during a chosen time period. For example, charts show minute, hourly, daily, weekly and monthly price movements. This helps traders predict the future short and long term price movements. The most common forex chart types are the line, bar, and candlestick charts.
In this forex chart, the price movement is shown by lines connecting from one closing price to the next closing price. A line chart is the most basic as compared to bar and candlestick charts.
Line Charts show whether the market is in an uptrend, downtrend or in a range. However they also give minimal information; A line chart is formed by connecting one closing price to another. It does not show information such as the highs and lows of price in a specific time period.
The bar chart differs from the line chart as it indicates the open, high, low, and close. This is why bar charts are also referred to as OHLC charts.
- Open: This is the opening price at the set timeframe.
- High: This is the highest price traded at the set timeframe.
- Low: This is the lowest price traded at the set timeframe.
- Close: This is the closing price of the currency at the set timeframe.
The price movement within the set time period is shown by the length of the bar.
The bar below is a bullish bar. A bearish bar has the open above and the close below.
Bar Charts provide more information about prices in comparison to Line Charts, but their visual representation is not a clear as with Candlesticks.
Another type of forex chart is the candlestick chart. This chart also has the open price, high, low and close price. The difference between the two is that the candlestick’s body is coloured. The most used colour for a bullish candlestick is either green or white while for a bearish candle it’s either red or black.
In a bullish candle, the closing price closes above the open price while in a bearish candle, the closing price closes below the open price.
- Open: This is the opening price at the set time frame.
- Close: This is the closing price at the set time frame.
- High: This is the highest level price reached at the set time frame.
- Low: This is the lowest level price reached at the set time frame.
- Body: Is the distance between the opening and closing prices.
- Shadow: These are the thin lines above and below the body of the candlestick.
The great thing about Candlesticks is that they are relatively easy to read and understand.
Final Thoughts on Forex Chart Types
Line charts, bar charts, and candlestick charts are all important technical analysis tools. Each of them has its own advantages and traders can choose which tool they want to work with based on their personal preference.
To keep reading more articles about trading take a look at our Forex Education section.