Understanding Forex Price Charts
There are two ways you can execute trades in the forex market. By using fundamental analysis and through technical analysis. Though both techniques are effective but the technical analysis is considered to be more accurate to make assumptions about the currency price movements. A Forex price chart represents a group of data that together forms different shapes. A trader uses this information to understand the on going market trend for a currency. Read more to learn about different kind of Forex charts.
Types of forex charts
Basically there are three types of Forex charts that can be found:
- Line Chart
- Bar Chart
- Candlestick Chart
Line chart
If you want to have a broader view of the currency price movement, line chart is the ideal one to go for. In a line chart the closing price of a currency is shown in different intervals. This can be the price difference of a market within a few minutes or even in between months. The line chart is easy to understand and helps a trader to identify the trends of a currency pair:
Example of a line chart
Bar charts
However, if you want to have detail information of a currency movement then bar chart can provide you that. It might not be as straight forward as the line chart but once you know the symbols it won’t take you long to interpret the data from a bar chart.
Each bar of the chart demonstrates the price variation of a currency in a given period. The top most point of a bar represents the highest price achieved by the currency pair at a given time and the point at the bottom represents the lowest price.
The opening price of the currency pair is shown through a dot in the left side of the bar. On the other hand, the closing price is shown by a dot in the right side.
Example of a bar chart
Candlestick charts
Candlestick charts were developed by the Japanese traders to analyze the rice market but gradually have become very popular to interpret the forex currency prices. The candlesticks represents the data in the same way the bar charts does where the top of the stick shows the highest price and the bottom point shows the lowest price of a currency pair for a specific period of time.
The basic difference between bar and candlesticks is in the representation of the price condition in colors. The red candlestick means the price is falling where the green candlestick means it is on the rise.
Each candlestick represents the currency value for a given time. The collection of candlesticks forms different patterns which have different names like Morning Star and Dark Cloud Cover. These patterns represent different market conditions. Candlesticks show a slightly different view to bar charts, as you can see below (the same data is shown).
Example of a candlestick chart
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Tags: Bar, Candlestick, Forex Chart, Indicators, Line, Price Movements, technical indicators