You want to make chart analysis of data but how? Today, I am going to cover the Forex trading charts
There are basically three types of charts in Forex: These are line chart, bar chart and candlestick chart.
After reading this article, you are will be able to answer these questions. How to read forex charts? How to read candlestick charts? How to read trading charts? How to read stock line charts?
Maybe you think of applying line chart trading strategy. Let’s start to learn Forex line chart then!
Line chart is probably easiest one to read among forex charts. Line chart meaning is basically a line between two prices of closing. When it’s compound all together, you are able to see how the price changes over a certain amount of time.
Before making bar chart analysis, you should comprehend the bar chart. Bar chart is a little bit complicated among other fx charts.
There are four values you can read from price bar chart. These are opening, closing, highs and lows. You should look for bottom of the bar to see lowest value paid. In contrast, if you want see the highest value paid, you should look for top of the bar.
Short horizontal lines indicate opening and closing price of the relevant vertical bar. However if you wonder range of trading, you should consider the vertical bar as whole.
Be aware, ‘OHLC charts’ is another name for bar chart. As you can guess, the expansion of OHLC is opening, Highs, Lows, closing.
When we examine bar of forex trading charts element by element. There are two possibilities. In both cases, the top will indicate highs and the both will indicate lows and opening and closing will be in between top and bottom.
However, in some cases, opening will be top of closing. It means this particular currency lost value in this trading time. But, in other cases, opening will be under of closing and this means the currency gained value.
However, we should examine forex bar charts more detailed to get an understanding bar charts. There are four possible combinations after connecting current and previous bars. The model is developed by Burton Pugh.
So let’s breaking down Burton’s model one by one. These combinations can also known as swing charts.
Swing trading is found useful among traders because of its ability to show trends. We wouldn’t overestimate if we conclude that swing chart is the most used method to grasp trends in technical analysis.
Before diving into details, we should answer this question: ‘Why would we use swing chart in all trading charts?’
Swing charts are able to show trends without any tiring effort. Also there isn’t much noise in swing chart. So if you ask what is ‘noise’, I would say it’s misinformation that confuses you when determining trends.
Swing charts are basically
Higher highs and higher lows indicate bullish tendency. As you know, it means increase of the value. But there is also Bearish tendency which occurs when lower highs, lower lows. In contrast it shows decrease of the value.
So there are two formations left. One is called ‘Outside’ and it occurs when higher highs, lower lows. The other one is ‘Inside’ and it occurs when lower highs, higher lows.
Reading candlestick charts can seem hard at first. But after you read my extensive explanation, it will be easy for you. Don’t try to make candlestick chart analysis before reading this article.
You can read the price information in better way in candlestick chart. Because it’s more graphic based chart.
The vertical line has same meaning as bar chart which shows range of high to low. But there is a difference with bar chart. There is a block to show opening and closing prices. If the currency lost value, the block is colored.
Traditionally, if the block is black, the opening price will be located upper than closing price. In contrast if the block is white, the closing price will be located upper than opening price.
But wait, we are in the 21th century right? So why don’t we use real colors like green and red, then? So many new graphs made are in green and red. Green is used for white and red is used for black.
Thus when the opening price is under the closing price, the block should be green. However when the closing price is under the opening price, the block should be red.
I have to mention again to counter confusion, red is used instead of black candlestick and green is used instead of white candlestick in new type of forex graph.
You can see on the image below, how beautiful the candlesticks and how useful to read them.
The only purpose of candlestick graph is to increasing of understanding forex charts. Otherwise you can get all the information on OHLC bar chart as well.
So what are the advantages of candlestick?
Candlesticks are easy to read and very good to begin making forex trading chart analysis. For example you can’t get so much information from the simple line chart and you may become confused when reading bar chart. So Candlesticks are awesome!
Using candlesticks are really easy. You can figure out the data almost instantly when you look at candlestick forex trading chart.
Moreover, there are many research on visuals. They all confirm that increased visuals help comprehend something. Thus it may contribute your to your trading as well.
You may find it amusing but I am still going to tell you. I believe that learning candlestick patterns are easier to remember, because they have very nice names.
For example: Marubozu, Spinning Tops, Doji. After learning these name once. I don’t think you will forget again.
You can easily differentiate turning points of market. How trends change over time? When the change from uptrend to downtrend or vice versa occurs? You will be able to see these once you learn reading forex trading chart.
So if you read all parts of the article, now you should be able to answer these questions.
Which type of forex trading chart draws one closing price to the next closing price in a defined period of time? What is the other name of the bar chart?
What is the upper peak and lower peak indicate in candlestick chart? Why black and white colors are used less nowadays? What does green and red indicate in candlestick forex trading chart?
If you want to learn more about Forex trading chart, read my candlestick article for more detailed explanation of candlestick chart.
Also i really care about ideas of my readers. So please comment below!