Types of Forex Charts
There are different types of charts used in technical analysis of the FX market. Some of the most common ones include line, bar, and candlestick charts.
A popular chart type used by forex traders is the candlestick or Japanese candlestick. We'll focus mostly on candlesticks because they depict the broadest picture of price changes over the time frame under study.
A candlestick is made up of two separate parts, the body and the shadows. The top and bottom of the body show the open and closing prices for the time period being considered. The top and bottom of the shadows show the high and low prices for the period. The body is filled based on the opening and closing prices of the period. If the closing price is lower than the opening price then the body will be filled in. If the closing price is higher than the opening price then the body won't be filled in. Filled in candlesticks means the price is declining, open candlesticks means the price is increasing.
But what happens if the closing or the opening price is the high or low? Then there will be no shadow above or below depending on whether the opening or closing price was the high or low.
For example, the candlestick shown to the right opened at its low and closed at its high. Therefore, there is no shadow on either the top or bottom of the body.
Another type of chart type is the line chart. Line charts are quick and simple to interpret but don't necessarily convey complete information. The image to the right is an example.
The last type of chart that we'll discuss is the bar chart. The image shown to the right is an example of a single bar of a bar chart. As you can see, bar charts convey very similar information to candlesticks but in a slightly altered format. The more visually appealing candlesticks, which are easier to skim, are preferred by many traders. The bar chart requires distinguishing between the left pointing open and the right pointing close.