It is a graphical tool which allows forex traders to view the historical picture of the currency exchange rate. It provides a useful data of the exchange rate for traders to conduct technical analysis and make a decision for further trading. Free software (MT4 and MT5 etc) are provided to the traders to perform his trading operations. We can connect and manage our trading accounts (demo or real) with this software. Many useful options, tools, and indicators are available for controlling trading activities.
How to Read Forex Charts?
The forex charts provide technical data in different timeframes, i.e. in minutes, hourly, daily, weekly, and monthly. During the selected timeframe, each chart makes its open, close, low, and high values. It depends on the analysts that how they analyze the trading charts. Traders can read bar or candlestick patterns along with indicators. After analyzing trading charts we can initiate decisions for future trading and planning.
Types of Forex Charts:
There are three different types of forex charts using in technical analysis.
1-Forex Bar Chart
2-Forex Candlestick Chart
3-Forex Line Chart
(1) Forex Bar Chart:
It consists of one vertical bar and two small horizontal bars shows high, low, opening and closing price in the market. The left side horizontal bar shows the opening, and the right sidebar shows closing price. It gives us more data than the line chart but less popular than the forex candlestick chart. This chart is also known as ‘OHLC’ (Open, High, Low, and Close) charts. Example,
in the above image, you can see,
Open Price: It is a little horizontal dash at the left side of the vertical line which indicates the opening price. It makes at the beginning of the specific trading period.
Closing Price: The same little horizontal dash at the right side of the vertical line shows the closing price. This made at the end of the specific trading period.
High Price: Top of the vertical line made in a specific period indicates the highest price rate.
Low Price: Bottom of the vertical line made in a specific period indicates the lowest price rate.
(2) Forex Candlestick Chart:
This is the most popular forex chart used in the forex market. It consists of candlesticks. Each candlestick has two parts, i.e. body and shadows. The filled area between the opened and closed prices is called ‘body’ while the bars which coming out at the top and bottom of the candle body are called the ‘shadows’. Each candlestick shows open, close, high, and low prices of the security of the selected time frame. Top of the upside shadow indicates the highest rate while low of the bottom shadow indicates the lowest rate of each candlestick. The forex candlestick chart gives us a clear visual potential of the market trend. It also gives us an indication of the reversal trend. Example,
In the above image, you can see a blue bullish candlestick. A bullish candle has a closing price higher than its opening price. You can also see a red bearish candlestick which has a closing price lower than its opening price. Both candlesticks have an upper and lower shadow which makes it’s high and low. You can change the color of bullish and bearish candlestick according to your own choice.
(3) Forex Line Chart/Line Graph:
It is the simple forex trading chart consists of a single line. It connects one closing price to the next closing price which shows the general movement of the security prices in the selected timeframe. The line chart shows the behavior of the general price movement. It doesn’t show the information that required us for future trading and planning. Example,
Using of Technical Indicators on Forex Chart:
We can insert useful various technical indicators in our foreign exchange chart. Because it gives more information about the market sentiment/reaction and possibly confirmation in the market trend in a selected timeframe, e.g. Moving average, RSI, Bollinger band etc.