3 Types of Forex Charts that Traders Need to Know
The trader’s activities are closely related to the analysis. In order to be able to do a good technical analysis, we must of course know the charts or charts that we use in trading.
The chart shows the price movement of a product in a time frame. The Y axis (vertical line) shows the price, while the X axis (horizontal line) shows the time being measured based on the selected time frame. By understanding the chart, we can understand the long, medium and short term trends of the product, so that we can also perform better trading analysis. This time we will discuss three types of charts that are often used in forex trading.
1. Line chart
This is the simplest chart in forex. The line graph forms a line connecting the closing price points. This chart only shows the closing action, without any other detailed information. Therefore, a line chart is more suitable for knowing the trend, whether the price tends to be bullish (bullish) or bearish (bearish).
2. Bar chart
Compared to line charts, bar charts contain more information.The lowest point shows the product’s lowest (low) price in a time frame. The horizontal line on the left is the product’s opening price (open), the horizontal line on the right is the product’s closing price (close), and the upper point shows the product’s highest price (high) at time.
3. Candlestick chart
Candlestick charts are a better variety of bar charts, so forex traders use them widely. The information shown is the same as the bar graph. Here’s how to read the candlestick:
A candlestick consists of two parts, the shadow or wick and the body. The shadows are two vertical lines at the top and bottom. The lowest point in the shadows shows the lowest price of the product (low) and the highest point shows the highest price of the product (high) each time.
We can see the high and low price of this shade. If the upper shadow is longer, this means that buyers in the market are trying to increase the price, but to no avail. Conversely, if the lower shadow is longer, it means that sellers are trying to lower the price but to no avail.
The body is the part of the bar located in the middle of the candlestick. There are usually two different body colors. In the above example, we are using green and red body colors. If the closing (close) price is higher than the opening (open) price, the body is green. This indicates a strong buying interest. Conversely, if the opening price is higher than the closing price, the body color is red. This means that selling pressure is moderate. In candlesticks, the higher price position is always at the top. So, on the green body the closing price is higher and on the red body the opening price is higher.
When the market is going through a trend with high momentum, you will see candlesticks with long bodies and short shadows. And when market conditions are volatile, you will see candlesticks with short bodies and long shadows.
Charts are a very important source of information. Get used to seeing chart movements regularly every day, and then your ability to perform trading analysis is honed. This will give you an edge in making profitable deals decisions.