There are three main types of Forex charts used by trades.
- Line chart
- Bar chart
- Candlestick chart
In forex, most traders use candlestick charts. However, I will go through each type of chart as it is beneficial to know them all.
A line chart is made up of a series of dots connected by a line.
Line charts are very basic and they do not provide a trader with much information. This is why most traders do not use line charts.
There are some advanced uses for line charts in price action. However, this is something you will learn later.
In Forex, a bar chart is made up of a series of bars. These bars show opening price, closing price, as well as the high and low for the period of the bar. The top of the bar is the highest point the price reached and the bottom shows the lowest price that bar fell. The dash on the left shows the price the bar opened and the dash on the right shows the price the bar closed. Bar charts are also known as OHCL charts (Open, High, Close, Low).
As you see, bar charts provide you with much more information about a currency than Line charts.
However, many traders find that bar charts aren’t easy on the eyes. Especially when you zoom out and see a lot of bars on one chart, it is hard to keep track of price. This is where candlestick charts come in.
Candlesticks charting comes from ancient Japan. They were used by Japanese rice traders to keep track of changes in the price of rice.
Candlestick charts are very similar to the bar charts. However, most traders prefer the look of candlestick charts.
Candlesticks have bodies unlike bars. Where the open dash and close dash are the top and bottom of the candlesticks body. It makes it a lot easier to see where the candle opened and closed. The different coloured candle bodies represent whether the candle moved up from open or down.