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4 Types of Forex Charts and How to Read Them

  • by Money Life Research
4 Types of Forex Charts and How to Read Them

 

Forex charts define the movements in prices of currency pairs. This will help you to find out about the historical and current price behavior of currency pairs. Technical and market analysts use these forex charts in combination with the forex signals to determine the market movements in future. A forex chart is simply a visual representation of a currency pair’s price over a designated period of time. It also represents the trading activity that took place over a particular trading window.

With forex charts, analysts find it easier to identify and assess the movements, patterns, and tendencies of currency pairs. There are various types of forex charts that are used by analysts in the market. In this article, we have listed 5 types of forex charts and how you can read them.

#1. Line Chart

In the forex market, a line chart draws a line from one closing price to another closing price. You can simply read this chart to understand the movement in the price of a particular currency pair over a period of time. This chart is super easy to follow and you can understand the movements in the closing price of a currency.

However, this chart will not provide a forex trader with details about the price behavior within that period of time. All you know is the closing price of the currency at the end of the trading period. To get such detailed information about the market there are various forex signal providers who can help you in the market.

#2. Bar Chart

A bar chart is a little more complex than a line chart. In this chart, you get complete information about the opening and closing prices as well as highs and lows during that particular period of time. This chart can help an analyst to gather information about price ranges in each trading period. These bars increase or decrease in size over a period of time depending on the volatility.

You can read the chart simply by understanding that the bottom of the bar represents the lowest traded price over that period, while the top of the bar indicates the highest price paid for a currency pair during a particular trading period.

The bars will become larger as the price fluctuations increase. That means the higher the volatility, the bigger the size of the bars.

#3. Candlestick Charts

This is an illustration of a bar chart. This chart will give you the same information as the bar chart but the format is good to look at and more organized than the bar chart. The cart is easier to read where you can understand the highs and lows achieved by a particular currency pair using candle-like bars.

#4. Point and Figure Charts

These types of charts allow the traders to filter exchange rate moves, identify support and resistance levels for a currency pair and provide forex tips based on specific patterns of the chart. These charts are useful in providing forex signals based on market movements.

Final Word

We hope this article helps you to understand various forex charts and how to read them.


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