There are different types of forex charts which can help make the reader the understand the supply and demand in the market. The historical price action can easily make the user spot the supply rich and demand prone zones.
Reading A Forex Chart
Now, it is time to get into the actual charts and learn how to read them. A forex chart shows a graphical illustration of the exchange rate between two currencies. You can see both the real-time data and the past history.
There are three types of charts: line charts, bar charts and candlestick charts. Candlestick charts are the most popular. But it is useful to know how to read all the three types of charts.
Each chart can be viewed in different time frames. In your trading platform, you will see the options to switch between various time frames like 1 minute, 5 minutes, 15 minutes, 30 minutes, 1 hour, 4 hours, 1 day, 1 week and 1 month.
Types of Forex Charts
Although there are several types of forex charts, only three are used in common- Line charts, Candlestick charts and Bar charts.
This chart is the simplest chart and doesn’t give much detail. A line chart just has a line drawn from one closing price to the next closing price. So, all you see in a line chart is a series of closing prices.
Even though they are not popular, sometimes traders use these charts if they want to have a quick look at the least amount of data without all the cluttering information.
Here is how a line chart looks like:
A bar chart reveals slightly more information than the line chart. You see both closing and opening prices in a bar chart. So, if you look at a 1-hour chart, each bar represents 1 hour. A bar in a 1-hour bar chart shows the price it opened within that hour and the closing price of that hour. In addition to that, it also shows the highest and the lowest prices of that hour.
In a one hour chart, The top of a bar shows the highest price of the hour and the bottom of the bar shows the lowest price. The little horizontal hash on the left side shows the opening price of the hour and the horizontal hash on the right side of the bar shows the closing price of the hour.
You can apply the same for the other time frames. Since each bar shows the open, close, high and low prices of a currency, the bar charts are also known as OHLC charts.