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Forex Education | Forex Guide

 

 

TYPES OF CHARTS

What sorts of charts can you plot?

 

Line charts are one of the simplest kinds of charts. Depending on the time interval that you choose, the points on the chart are the closing rates for a given currency pair for each time interval. Joining these points in a “dot-to-dot” fashion gives a line moving from left to right, and up, down or up and down depending on the market. You can then check for trend lines by selecting just the “local lows” (reaction points) and the “local highs” (rally points), and also support and resistance levels in the same way.

 

Why use other types of charts than just line charts?

 

Although line charts can be useful, they only have limited amount of information. Bar charts add more information by making each point into a vertical line with three markers corresponding to the closing price and the highest and lowest price for that time interval. A slightly more elaborate version has an additional fourth marker to show the opening rate for the time interval concerned.

 

Bar charts or Japanese candlesticks?

 

Japanese candlestick charts take the bar charts above a step or two further. Instead of the single vertical line of the bar chart, we now have a vertical column that is either black to show that price decreased over the time interval, or white to show that it increased. The levels and the difference between the opening and closing levels corresponds to the length of the column. The highest price is indicated by a vertical line extending from the top of the column and the lowest price by a vertical line downwards from the bottom of the column. All in all, this makes the vertical column look a little like a candle. Hence the name, Japanese candlestick charts (invented centuries ago in Japan).

Who makes these charts?

 

You can make these charts if you want to, but you’ll also find software for PCs and online Forex trading platforms that will produce different charts for you. In this information age, it makes much more sense to let computers do the work in a fraction of a second, so that you can use your time to make the right trading decisions.