The 3 Types Of Forex Charts
Forex charts will be your view of the marketplace. Your view will directly affect your perspective of the Forex marketplace.
So before you go onto trading the forex market, you must decide how you want to see the forex market. Many people have already heard of Japanese candlesticks, but few beginners know there are two other main ways to look at price action in the Forex market.
We’ll start off with the most common way that people view their forex charts. Japanese candlesticks have had a long history in trading, especially Forex.
This is a Forex chart type that you can use to view market price action.
You will see below exactly how a candlestick looks and why it’s called a candlestick chart.
It works by capturing the price movement of a specific time period (That you choose) and reports that data with the OPEN, HIGH, LOW, and CLOSE price in the form that looks like a candlestick.
The OPEN price is where the price was at the very beginning of the time period you chose.
The HIGH price represents the very highest point that price moved to within the time period.
The LOW price is the very lowest point that price got to in that same time period.
The CLOSE (Closing) price is where the price was at the end of the time period. The time period that you choose is called a time frame. To learn more about Time-frames, click here.
The reason Candlesticks are so popular is because it is straightforward to see whether price moved higher or lower within a specific time frame.
With the candlestick default settings, a price move higher will print a green (bullish) candlestick, and a price move down will print a red (bearish) candlestick. To learn more about what Bullish and Bearish mean, click here.
Can you see how the information captured appears like an actual candlestick? Now you know.
The distance between the Open and Close will be captured by the BODY of the Candle.
If price closed higher than it opened, the candlestick would be green. If price closed lower than it opened, the candlestick would be red.
This is important to note because the following two examples are not this beginner-friendly.
This is another Forex chart type, and as I mentioned above, your view will determine your perspective of the forex market.
Forex Bar Charts work by capturing the same data that a candlestick does, only they look slightly different from the famous candlestick charts.
A Bar chart does not have a body. A bar chart doesn’t emphasize the distance between the Open and Close price by showing a body colored in red or green.
In fact, a Bar chart looks a lot like a stick chart because, in its default setting, all of the bars are either black or green on your MT4, depending on your background.
The “stick” captures the same OPEN, HIGH, LOW, and CLOSE that a candlestick does, but a bar chart removes the body, making it look like a stick.
No body. Straight to business. Bar Charts can be a little bit harder to get used to, but out of curiosity, I used them once just to test myself, and I never went back to using candlesticks again.
But that’s just me. I also color-coded the bars.
A-Line Chart is the least robust of all the Forex chart types. A line chart does not capture the highs and lows of your chosen time period.
A line chart only captures the open and close of your timeframe intervals. The result looks like the line you would get from playing connect the dots only without the dots.
A line chart can be helpful, though, in finding key levels, although I can’t recommend using a line chart at this point in my career anyways.
The highs and lows of your time frame are critical information to have.
Wicks that have been caused by news or stop hunts are entirely invisible to people using line charts.
Maybe traders who trade VERY long-term might not need to see wicks, but there is no harm in having them either, but to conclude this list of chart types, we kind of saved the worst for last.
There’s no noise on a line chart, and it can be used to train your eye to see critical levels, but I think the compromise is too big to spend too much time studying them.
Don’t bet the farm.
Don’t lose your shirt.
Cut the L.
Keep the W.
Forex Chart Type FAQ
For most beginners, yes. This will be the chart type you want to get started with because it is the most beginner-friendly of the 3 main ones.
A Bar chart captures the same information that a candlestick chart does but there are no candles/bodies on a bar chart.