Charts plot the price movement
of a currency pair over time.
The x axis has time increments increasing left to right.
The y axis has price increments increasing bottom to top.
Charts are used to keep track of current prices and for research on the
history of a pair’s price movement.
There are three types of charts used in Forex: the line chart, the bar
chart, and the candlestick chart. For the sake of illustration and
comparison, we will visualize each type of chart on EUR/USD during the
period of June 2010 through July 2010.
The most basic of the three charts is the line chart because it
represents only the closing prices over a set period of time. The line
is formed by connecting the closing prices over the time frame. Some
may like for the line chart for its simplicity. However, it is lacking
in showing the visual information of the trading range, such as the
high, low, and opening.
Example of Line Chart on EURUSD Daily:
As you can see, line charts show closing price movement only.
A plot consisting of a series of vertical lines, each representing the
price range during a specified time period, each vertical line have a
small horizontal line connecting on its left, indicating the opening
price for that time period, and a small horizontal line connecting on
its right, indicating the closing price for that time period.
Example of Bar Chart on EURUSD Daily:
Let us look at an individual bar in more detail:
As one can see, the single bar of a Bar Chart shows the entire price
movement: the opening price (horizontal bar on left side), close
(horizontal bar on right side), highs (the extension from the open
bar), and low (the extension from the closing bar price).
Japanese Candlestick Charts
A plot consisting of a series of thick
(“candles”), colored to indicate a lower or higher close compared to
the previous candle, representing the price range, high price, and low
price for the time frame it represents.
Example of Candlestick Chart on EURUSD Daily:
Both the Bar chart and the Candlestick chart give the same info;
however, the Candlestick is easier to read.
Candlestick Chart shows price movement, closing prices, opening prices,
& highs and lows for a given time frame. The top and bottom of the
body reveal the open and close, the wick after the top shows the high,
and wick below the bottom shows the low. We will be showing more
examples of candlesticks in the chart patterns under Japanese
For a more detailed discussion on candlesticks and their patterns,
please refer to our article.
The standard unit of time measured on a chart. In MT4 the chart time
frames are M1 (1 minute), M5 (5 minute), M15 (15 minute), M30 (30
minute), H1 (Hourly), H4 (4 Hour), D1 (Daily), W1 (Weekly), and MN
(Monthly). The 5 minute candlestick chart means each candlestick shows
the price range that occurred during 5 minutes of trading, at the time
listed on the x axis of the chart.
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