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A Comprehensive Look Into Different Types Of Forex Charts

A Comprehensive Look Into Different Types Of Forex Charts
August 22
14:49 2014

Forex charts allow traders to observe or view historical trends of currency exchange rates. Just like with other charts used in the trading of other securities (futures or stocks), chartists, or technical analysts primarily use these charts. Professionals typically plot a certain currency pair’s exchange rate as it continues to evolve with time. The manner in which a trader opts to do his or her plotting, determines which type of forex chart to use. Initially, these charts were plotted on graph paper by hand. Nowadays, traders plot them on computers with the help of technical analysis software. Four types of forex charts exist. These are Line charts, Bar charts, Candlestick Chart, and Point & Figure charts.

Line Forex Charts

Simple line charts draw a line crossing from a particular closing price to the next one. It helps to observe general price movement of currency pairs over time. With this chart, traders are able to observe effortlessly the rate at a number of set intervals with time. A line chart can measure changes in values over weeks, days, hours, or minutes. The best attribute about it is the fact that you can follow results recorded easily through a particular trend. Most traders analyze a line chart for a short duration. This chart does not ascertain what happens between set periods. It only measures value increments set by users.

Bar Forex Charts

Bar charts are relatively complex compared to line charts. This charts show opening and closing prices together with the lows and highs. The vertical bar bottom indicates lowest traded price for a particular time period while the top bar shows highest price paid. The vertical bar reveals the trading range of a certain currency pair as a whole. On the bar’s left side, there is a horizontal has which acts as the opening price. The right side’s horizontal hash acts as the closing price. “OHLC” is the other name for bar charts. This is because they show Open, High, Low and Close values of a certain currency. This is the best forex chart to get information on range comparisons. Most forex traders today prefer these bars compared to the line charts.

Candlestick Forex Charts

Candlestick charts show similar price information as the bar charts. The main difference is that the former are prettier in terms of graphic format or presentation. Just like their bar counterparts, these charts still indicate high to low range using a vertical line. Studying bar and candlestick charting ought to be different. In the latter, the larger body (block) at the middle normally indicates a range between closing and opening balances. Conventionally, if the block at the middle is colored or filled, it means a currency pair closed lesser than it opened. With candlesticks, you can easily understand all the emotion behind a day’s price. It brings out a unique display of Open, High, Low, and Close. Having said that, it is true to conclude that a candlestick contains wicks and the real body. The real body reveals the conviction of a move. The wick on the other hand shows an overextended emotion which in most cases will not hold. In today’s market, Candlestick analysis receives more attention.

Forex Charts

Point & Figure Forex Charts

These charts normally measure prices without the involvement of time. Their main aim is to bring out the movement or trends of prices. For example, an escalating number of the X’s show a growing trend. On the other hand, O’s decreasing number reveals a decreasing price. For those looking for a chart that gets rid of non-significant price movement on a day-to-day basis, then this chart is the best. The common uses of these types of forex charts are to:

  • Generate sell and buy signals
  • Identify resistance and support areas
  • Identify trends

Most professional fore traders create these charts by hand. They come in handy in observing exchange rates move. Of great importance to note is that Point and Figure forex charts focus mainly on price action. Consequently, traders are able to remove all distracting time elements from the schemed image as well as resulting analysis.

More information about forex charts

Forex charts are very important for tracking prices. They help forex traders analyze and determine whether it is an ideal time to sell or buy a particular currency. Popular technical drawing tools and analysis indicators come in handy in the technical analysis of every type of forex chart. The main aim of forex trading is buying or selling of currencies with the main aim of making profits through future sales or purchases. One of the most popular currency pairs is the Euro/US Dollar. Here, the price represents ratio of a single euro to dollar. A forex chart represents both historical and real time forex data. All these are vital in helping traders make sound determinations about future moves. If you are a trader looking for daily trade values, then the candlestick or bar forex charts are the best to work with. They present daily OHLC values thus acting to your advantage.

Closing thoughts on forex charts

Having a comfortable grasp about the different forex charts is important. It helps in learning the various benefits each of them brings with it so that you can choose the ideal one for your trades. Ensure that you settle for a chart that you are more than comfortable in to manage your risks. You should also opt for a chart that will enable you to find high probability entries effortlessly. With this combination, you are sure to reap huge benefits in all your forex trades.

These four charts are crucial in following all latest trends in the currency market. Regardless of whether it is your local currency trading or international trading, these charts are the gateway to effective and sound trading. In order to be efficient on studying fluctuations in major currencies of the world, studying these four charts is paramount. There is no short cut to this. All the best in your forex trading!

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Jadenforex

Jadenforex

Articles on the Jadenforex blog written by "Jadenforex" include guest posts, and items written in collaboration with several authors.

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