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Use Forex Charts For Effective Results

This article is about different forex charts used in the currency market.

Using Forex Charts

To trade effectively in this market, it is vital that you learn how to draft forex charts and use it.  You will be able to check on the trend in the market and make profitable decisions on your trades.

Three of the most popular forex charts in this market are line, bar and candlestick charts.

Line Charts

These are simple charts that most people are familiar with.  It involves drawing a line from the closing price at a specified time, up or down to another closing price at a different time.  When the points you have plotted are joined by drawing a line, you are able to recognise the movement of the price of your currency pair over the time period specified.

Bar Charts

Bar charts are a bit more complicated than line charts.  It shows the viewer the opening prices, the closing prices and the lows and highs for a certain period.  The lower section of the vertical bar indicates the lowest trading price for that specific period of time.  The top bar indicates the highest price for the same time period.  The vertical bar indicates the complete trading range of the currency pair.

The horizontal hash on the left indicates the opening price and on the right it indicates the closing price.

A bar is indicative of a time block.  This could be one day, one week or even one hour.  When you view forex charts and it refers to a ‘bar’, you should take note of the timeframe that it has been drafted for.

Bar charts are also referred to as OHLC forex charts.  This shows the opening, high, low and the closing price for a particular currency.  Below you can see an example of a price bar.

The line that is marked ‘open’ indicates the currency’s opening price.  The top of the vertical line shows the currency’s highest price during the period.  The bottom of the vertical line shows the currency’s lowest price for the specified time period.  The horizontal line marked ‘close’ shows the currency’s closing price for the period.

Candlestick Forex Charts

Candlestick charts and bar charts indicate the same type of information.  Candlestick bars are used to show the range of a currency’s price from the highest to the lowest on a vertical line.  On these charts, the body or the large block that is in the centre indicates the price range between the starting price and the ending price.  If that block has been coloured, it means that the closing price of the currency was below its opening price.  Some of the charts indicate colours instead of black and white.  The most popular colours used are green and red.  If the body of the candle is red, it means the currency price closed at a rate which was lower than what it opened with.  In the case where the body is green, it shows that the currency’s closing price was above that of its opening price.

Candlestick charts are said to be easy to read and that is the reason for its popularity.  You can obtain the same information by looking at the OHLC bar chart, but the colours used on the candlestick makes it easier to read.  Beginners find it simpler to understand the candlesticks.

Beginners in the marketplace should learn everything they can about forex charts.  It is an easy way to determine the potential movements in the currency price.



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