Forex chart is a method of visual perception of the market information. It builds up a visual presentation of the price movement within a certain period of time that is based on the flows of market quotations. At present, all the traders apply graphic analysis tools as they allow seeing what is happening on the Forex market. This article will be devoted to the types and peculiar features of the Forex charts most commonly used in Forex trading.
Line charts offer the simplest method of the market information visualization. To build the line chart it is necessary to collect data within the certain period of time. It can be the first / the last price of every trading minute or the maximal / minimal price of the minute. The 60-minute trading will bring sixty marks connected with the line. As a result, we will have Forex line price chart. The advantage of this chart lies in the fact that it shows the general direction of the price quotation and excludes the fluctuations inside the given period of time. For example, price quotations make multiple fluctuations within a minute, but the line chart will show only one mark that is a closing, as a rule, or an opening price.
If the trader wants to see prices within the certain trading period he should pay attention to the candlestick chart type. Here, instead of showing only one price every candle shows four prices: the highest, the lowest, the first (opening), and the last (closing) prices of the period. For instance, if we talk about a minute period the candle will show the maximal price of the minute (upper shadow), the minimal price (lower shadow), and the opening and closing prices spacing between which is called a candlestick body. At the first glance this Forex chart looks very complicated however with the course of time you will get accustomed to it and will “read” it quite easily.
The advantage of the candlestick chart over the line one is evident as it brings four times more information. On the other hand, sometimes you don’t need this information. For example, if the trader wants to understand the general direction of the price there is no sense for him to use the chart of the higher scale. If the trading is conducted on minute charts you can look at hour line charts. If the trading is conducted on hour line charts you can look at daily line chart.
The candlestick charts also show the price behavior near the support and resistance levels. The price quotations often reach a certain level an after that roll back. The line chart cannot show such nuances.
There are also other types of Forex charts however line and candlestick charts are considered to be the most illustrative and applicable for everyday technical analysis.