Line, bar or candlestick?

Chart-crawling with three of the most popular chart types in the forex industry!

Charts are a trader's

"bible" to the forex market as it enables them to identify and analyse a

currency pair (and not only) movements, patterns, and tendencies.

Still, it's important to create well-designed and readable charts that will

enhance your market analysis and trading decisions.

There are many different types of trading charts, however they all show the

same information. The most popular types of trading charts are: Line Charts,

Bar Charts and Candlestick Charts!

Hover down to get yourself familiar with each chart, as we also give 5 tips to

read them more easily!

Line Chart

A line chart is often used for television, newspapers and many web articles

because it is simple and easy to digest.

This type of chart usually shows closing prices and nothing else, each

"connected" to the previous closing price to make a continuous line

that is easy to follow, and when adjusted together with a line, we can see the

general price movement of a currency pair over a period of time.

The line chart is easy to understand, but it does not provide the trader with

much information about price actions during the time. However, it allows the

trader to see patterns and visually compare the closing price from one time to

the next. The line chart also best illustrates patterns, which are simply the

slope of the line.

Bar Chart

Also known as "HLOC", this chart displays the high, low, open and closing

prices of a particular currency pair. The opening price is represented by the

horizontal hash on the left side of the bar and the closing price by the

horizontal hash on the right side. A bar is simply a time segment, whether it

is one day, one week or one hour. The bottom of the vertical bar represents the

lowest traded price during that time span, while the top represents the highest

price paid.

With a bar chart one can see the price range of each period and indicate

whether a market is bullish or bearish (depending if the bar closes up-green

colour or down-red colour).

Candlestick Chart

This is the most popular type of chart in the forex industry and are used to

identify market turning points - reversals from an uptrend to a downtrend or

vice versa. A candlestick chart displays the high, low, open and closing prices

for each period.

The green candles indicate that the price closed higher than where it opened

whereas the red candle stands for the price closed lower than where it opened,

thus helping traders to identify bullish or bearish sentiments in the market.

One can say that this chart is the alternative of the bar chart but in a

prettier and more readable format.

5 tips to read your charts easier:

Choose colours that are easy to view. This will make the chart visually pleasing, but also create a well-contrast chart.
Chart backgrounds are usually kept neutral. Some traders choose colours for grid lines, axis, and price, again in a neutral tone, yet again one that contrasts with the chart background.
Use bold and crisp fonts to read numbers and words more clearly.
If you apply price bars and indicators to your chart pick colours that stand out from the background. Most traders usually use red for down bars and green for up bars as they can be seen and interpreted more easily.
If you have multiple monitors we advise you to create a workspace that is easy to read as there is more opportunity to follow more securities. Namely, one monitor could be used for order entry and the others to be used for charts and other market analysis tools.

At a glance

The best way to learn and practice reading trading charts is to experiment with

them in a demo account and find out the differences between them and adapt the

settings to see if it affects what you see.

As you study different trading strategies, you will discover that you may

prefer one chart to another, but this does not make it better, as it all comes

down to personal preference that suits your trading style.

Being able to read market data is critical in this competitive industry. You

may have all of the necessary knowledge for smart trading, but in the end if

you can't interpret these data efficiently, then you may come in difficult

situations. Developing high-performance chart setups will assist you in

increasing your knowledge thus becoming a more effective trader.