Chart is a graphical description of forex price movements over a specific period of time. There are two important parameters in forex chart, the X axis represents time, and the y axis represents price.
Forex Charts usually consist of three types :
- Line Chart
- Bar Chart
- Candlestick Chart
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A simple line chart draws a line from one closing price to the next closing price. When strung together with a line, we can see the general price movement of a currency pair over a period of time.
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EUR/USD 15 minutes Line Chart |
Bar charts provide more detailed information compared to Line chart. It shows not only closing price, but consists of opening price, highest price, and lowest price during a time period (timeframe). For example if you use 5 minutes chart, it means every price movements within 5 minutes period are represented by 1 single bar. |
EUR/USD 15 minutes Bar Chart |
Open: The little horizontal line on the left is the opening price
High: The top of the vertical line defines the highest price of the time period
Low: The bottom of the vertical line defines the lowest price of the time period
Close: The little horizontal line on the right is the closing price |
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Candlestick charts have the same characteristics of bar charts as they provide open, high, low, and close prices within one bar, but the main difference is the ease of interpretation purpose. We can easily interpret bullish and bearish pattern from the color of their bodies.
Candlestick bars still indicate the high-to-low range with a vertical line. However, in candlestick charting, the larger block in the middle indicates the range between the opening and closing prices. Traditionally, if the block in the middle is filled or colored in, then the currency closed lower than it opened.
In the following example, the ‘filled color’ is black. For our ‘filled’ blocks, the top of the block is the opening price, and the bottom of the block is the closing price. If the closing price is higher than the opening price, then the block in the middle will be “white” or hollow or unfilled. |
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We don’t like to use the traditional black and white candlesticks. We feel it’s easier to look at a chart that’s colored. In the chart below we simply substituted green instead of white, and red instead of black.
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EUR/USD 15 minutes Candlestick Chart |
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