With the Foreign Exchange market becoming so volatile, it isn’t surprising that many traders are relying on different tools to keep them earning a profit. One of those undisputedly crucial tools is Forex charts which give a one-glimpse summarization of how the market stands.
Currently, there are numerous Forex charts being used by traders, both old and new. The most common ones, however, only number three and are the most informative yet simple ones available.
Line Chart
The line chart is the simplest one of the three and is composed of an X and Y axis. The two variables used when plotting the chart is the closing price and the date, although there are some times when the former is replaced by the average. The points are then connected by lines, showing the trajectory of the currency throughout time. Obviously, traders can adjust the amount of time shown by the chart depending on the information they want to find out.
Bar Charts
Bar charts are typically used by new traders due to how easy it is to use. The system provides a glimpse on the opening and closing of the market as well as the high and low during that time. Bar charts can be very effective and more importantly – easy to understand. The Bar Chart can be set to focus on a specific time period and a timed bar movement. Basically, this means that if a trader has set their chart to a 3-minute interval, then every bar shown will represent those 3 minutes.
Candlestick Chart
The Candlestick Chart is definitely the most complicated of the three although it basically provides the same data given by a Bar Chart but with a more in-depth view. Specifically, it provides data on whether the movement has been Bullish or Bearish as indicated by the different colors of the candle’s body. The Candlestick Chart contains the High, Low, Open and Close prices for the market during a specific amount of time. They are called Candlesticks due to the main form of the chart. Each rectangular box is filled in with a specific color and made with a tail and a wick. The tail represents the highest value reached during the time frame and the tail shows the lowest.
Choosing from the Three
It’s perfectly possible to choose just one type out of the three Forex charts available. As already mentioned, seasoned traders prefer the Candlestick Chart since it provides them with more information than any other type. Note however, that the accuracy of the chart itself should be put in question. Forex charts are typically supplied by brokers using their own data. Hence, traders need to be sure that they are getting not only accurate data but also timely ones.
Keep in mind that the Forex charts will be useless if a trader doesn’t know how to read, analyze and apply their usefulness. Depending on the user, these charts can be an excellent indicator of the market’s movement and one of the best ways to earn big in this highly volatile market.