Line Charts, Bar Charts & Candlestick Charts
Charts are so incredibly useful when we are trading. Just by a quick glance at a chart we can gain solid information about the trading patterns over a time period. E can learn so much in a matter of seconds for example is the chart ascending or descending and already you know whether the price is going up or down. How steep is the climb or fall. Charts are essential for forex traders.
There are three charts which are mainly used by forex traders. These are line charts, bar charts and candlestick charts. Let’s take a look at each of these charts.
This plots the closing price and joins a line between then. Stringing together the lines across several closes creates a clean simple chart. If you are looking purely at price action this is possibly the most useful chart for you as a trader. There is little noise on the chart to distract you.
The bar chart is slightly more complex. It has more information included on it. The highest point on the bar indicates the highest level traded. The lowest point on the bar indicates the lowest point traded. Therefore, the vertical bar indicates the range of the price that the currency pair traded.
That’s not all. The hash on the left-hand side represents the opening price for the time period, whilst the hash on the right-hand side represents the closing price for the time period.
Given the information that this chart provides it is sometimes referred to as the OHLC chart. The
Open, High, Low, Close chart.
On this chart, each single bar refers to a period of time. This segment of time could be 15 minutes, one hour, one day, one week, one-month etc it just depends on what time frame you have the chart set.
The candlestick chart contains the same information as the Bar Chart, however it presents it in a clearer more graphic manner, which is one reason so many traders prefer it.
As with the bar chart, the vertical line represents the trading range for the currency pair, the high and the low traded. Meanwhile the body or the block indicates the difference between the opening price and the closing price. This block is then coloured accordingly. A red or black colour indicates that the currency pair ended lower, whereas a hollo, white or green colour for the block indicates a higher finish for the pair across that time period.
Candlestick charts are extremely useful for beginners but also for experienced traders. Novices like that the candlestick chart is easy to interpret. Meanwhile experienced traders also like to read the patterns on the chart which can indicate trend reversals or a turning point.
Vantage FX offers its clients a comprehensive charting package across all its platforms. A good charting package can make a huge difference to a trader. Check out the details of what Vantage FX offers on its website.