Knowing how to read and understand forex chart to a trader is what knowing how to walk or breathe to a human. It is a very essence of our lives. And even though for those only rolling into trading it might seem too difficult, we assure you that reading and understanding all three types of forex chart is much easier than you think.
First of all, there are, as I said, three types of forex chart. First one is a line chart. It is the most basic chart where the line can be seen going from one closing price to another day by day. This chart is insanely easy to read and understand as it only shows the dynamic of the relations between the two currencies.
Lets take a look at the easiet example of the chart.
The next chart is a bar chart. This one is just as easy, but its form is way more informative. A bar in the chart not only shows the price in opening and closing times but also displaying the highs and lows of the price for the day.
The bar chart consists of three straight lines – one long vertical and two short horizontals – the vertical line stands for the high and low of the price for the day [upper and lower points of the line]; horizontals stay for the closing [upper bar] and opening [lower bar] price.
The picture below is a perfect visual example of the bar chart explained.
The third one is arguably the most popular of the charts – candlestick chart.
Candlestick charts display just the same information as the bar chart, but they do it a more colorful way. There is also a number that the candlestick chart can display and all of the others can’t – the middle of the candle can display the range of the price for that day.
I also said that the candlestick chart is more colorful – that is because we can usually see this chart in green and red color. These colors help us identify whether the day closed for the asset on a winning or losing note where green is for winning and red is for losing.
You can see both - the candles and the chart consisting of them in the example below.
The next question is which one of the charts is more preferable for the traders? Well, my personal favorite is the candlestick. And no, it is not because it reminds me of a Christmas tree with all the green – red extravaganza. It is because it is the chart that combines all of the necessary information together with simplicity and usefulness. That is not something that we can see in any other chart. Plus, it does look cool, I have to admit.