Types of Forex Charts and How to Read

When it comes to trading, there are a lot of different charts that can be used. This article will teach you about the different types of charts and how to use them for your trading strategy. Hopefully, this will help you make better-informed decisions when it comes to choosing which chart to use in any given situation.

Forex charts are essential to understanding the movement of the currency markets. They can show you how prices are changing over time, and help you to make informed investment decisions. In this article, we'll go over the different types of forex charts and what they can tell you.

Types of Charts used in Forex Trading

Most of the time, charts are used in technical analysis. Before you can start analysing charts, you need to know what kinds of charts can be used to predict how the market will move and how different charts are made. When you're trading forex, you'll need to be aware of the different types of charts in order to make informed decisions.

Here are three types of charts that are most often used in forex trading:

1. Line Chart

A line chart is the most fundamental and straightforward price depiction in forex. Essentially, it indicates several pricing points for a certain item on the diagram and then connects the spots with a continuous line.

Now, although line charts are relatively simple to comprehend, they are actually too simple. They solely represent the closing exchange rates of currency pairings. Therefore, the line chart would not convey complicated information such as opening or highest/lowest prices to traders.

2. Bar chart

In contrast to the line FX chart kinds, bar charts are more detailed and give even more pricing. This bar depicts the four distinct values of a currency pair over a specified time period - minutes, hours, days, or higher.

Here are these four prices: the top and bottom ends of the bar reflect the highest and lowest values of the item within the specified time period; a short vertical line on the left indicates the beginning price, while the same line on the right indicates the closing price.

Bar charts are far more complicated than line charts for obvious reasons: whereas a line chart displays a single price, a bar chart indicates four values. But when it comes to the most intricate chart kind, even bars are insufficient.

3. Candlestick FX chart

In contrast to bar charts and line charts, which only display one price over a larger time frame, candlestick charts (depending on trader preferences) display four prices over a longer time frame. Briefly, the individual bars are grouped in a certain time period and provide the opening/closing and high/low values for a currency pair.

The "actual body" (the area between the open and close lines) on this chart style reveals whether or not a trader was successful. If the true body is white/green, this signifies that the opening price was lower than the closing price and the trader sold a pair at a higher price and received a payment. This indicates the trader who sold a pair at a lower price and suffered a loss had an initial price that was greater than the closing price.

How to read forex charts?

Time is plotted along the horizontal x-axis and price along the vertical y-axis on all trading charts. This indicates that when we move to the chart's left, we may observe historical prices. The displayed dates and times will vary based on the zoom level of the chart. The greater the zoom level, the more historical price movement will be seen.

The vertical y-axis in forex trading charts displays the 'exchange rate' pricing for the market being viewed. On the basis of this rudimentary understanding of price and time, we can deduce several situations that assist traders in deciding when and what to trade:

If the forex exchange market rate has declined from the left side of the chart to the right side of the chart, we can conclude that the market is in a downturn or that sellers are in charge.

If the forex exchange market rate has increased from the left side of the chart to the right side of the chart, we can conclude that the market is in an uptrend or that buyers are in charge.

This may seem elementary to some, but it is actually highly significant. Why? Because once a pattern is established, it may persist for an extended period. To determine how much a market rises or falls, we must examine exchange rate prices and determine what "pips" are.

Conclusion

There is a process known as technical analysis in trading, and here is where these charts are important. In order to draw specific inferences about the past performance of their investments, traders use price charts, as previously noted.

If you're looking to learn more about forex trading, be sure to check out our Forex academy. Here, you can find a wide variety of types of charts that will help you better understand the markets and make informed decisions. Whether you're a beginner or an experienced trader, there's likely a chart type that'll fit your needs.