The charts are one of the main tools in Forex trading; they are based on the market action that involves the prices. We can find several kinds of charts that can help us to identify behavior patterns, to create forecast and to analyze the market’s conditions.
The charts can be used in both kinds of analysis, the fundamental and the technical ones. While the technical analyses are focused on the “micro” movements, the fundamental ones are focused on the “macro” events (or external factors) that affect the trend of the market.
Among the main types of charts we can distinguish:
The line chart: is the simplest one, in each time unit shows the closing rates creating a homogeneous line. Although it doesn’t show what happened during the time unit selected by the users, is such a good tool for helping to set support and resistance levels.
Point and figure charts: these charts are focused on the price without time specifications. Instead of showing a linear representation of time they show the different trends in the price. This kind of chart is especially useful to filter out non-significant price movements helping the trader to determine the critical support and resistance levels.
Bar chart: this type of chart shows in each time unit that we select three different rates for each one. The common rates shown by bar charts are the high, the low and the closing, but we can also find charts that show one more rate, the opening of the period of time.
Candlestick chart: this type of charts comes from Japan. The units represented are similar as the ones in the bar charts, they show the prices at their opening, high, low and closing rates in candles form for each unit selected. We can find two kinds of candles, the transparent ones that show increase and the dark or full ones, which show decrease. The length of the candle’s body represents the range between the opening and the closing, while the whole candle (top and bottom included) show the whole range of trading prices for the selected time unit.
Candlestick chart: this type of charts comes from Japan. The units represented are similar as the ones in the bar charts, they show the prices at their opening, high, low and closing rates in candles form for each unit selected. We can find two kinds of candles, the transparent ones that show increase and the dark or full ones, which show decrease. The length of the candle’s body represents the range between the opening and the closing, while the whole candle (top and bottom included) show the whole range of trading prices for the selected time unit.
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