Chart typesChart types refer to the methods of visual representations of the price action of an asset on the financial charts. In forex, there are three different types of charts:
- Bar charts
- Line charts
- Candlestick charts
Bar chartsIn bar charts, the price action is depicted by the use of single vertical line and four short horizontal lines (two on each side), branching off from the vertical lines to represent open, low, high and closing prices as shown below.
Line ChartsIn line charts, only the closing prices are plotted on the chart and these plotted points are connected together by straight line segments to give the picture seen below:
Line charts are not very useful in forex technical analysis.
Candlestick ChartsThis is the gold standard of price representation in the forex market. Price is depicted to look like a candlestick, with a body and one or two shadows (to correspond to the waxy body and wick of a normal candle). Candlestick charts provide a lot of information about the behavior of buyers and sellers in the market to enable traders make informed trading decisions.
Depending on the time frame chart used, each candle may represent price action over one minute, five minutes, one hour, four hours, daily, weekly or monthly.
Nearly all forex platforms come with each of these chart types by default, giving traders the opportunity to choose any chart type of their choice.