One of the most interesting and useful secret weapons at your disposal is Forex charts. These are essentially tracking tools that allow you to see or understand potential patterns as they develop. These patterns have historical data that can assist with making a good or a better Forex currency trade. However, in order to be able to use these charts you really need to know how to read them. There is no secret code but the patterns do take some time to fully grasp and utilize.
There happen to be a number of different graphing patterns that are the basis of these charts but to keep it easy we will look at just three of them here. These are probably three of the most common chart configurations you will see time and time again during your trading career.
1 – Line Chart
A line chart is a simple pattern. What it does is it places a line that traces the space from one closing price to another closing price. The point of a line chart is that once a number of closing prices are recorded and strung together with a line, a pattern emerges. No, it’s not a hidden watermark of Elvis or the Queen Mary. What the closing price line chart does is it basically shows you the general price movement in a given currency pair over the period of time that the chart covers.
2 – Bar Charts
As tempting as it is to say that this is a chart that maps out the locations of all the local bars in a given community, that would be very wrong. Although such data could become a valuable resource sooner or later. A bar chart is somewhat more complex that a line chart as it tracks more than just closing prices. A bar chart records the opening and closing prices and it also makes note of the high prices and low prices. The bottom of the vertical bar on the chart shows the lowest trading prices that were recorded for the time period the chart includes. The top bar is where you would see the highest prices recorded. There are also vertical bars and what they show is the trading ranges for a given currency pair over the time span of the chart. Bar charts are useful for the amount of data they track on a single sheet. Plus, bar charts have more than one name. They are also known as OHLC charts because they show data on the Opening price, the High price, the Low price and the Closing price.
3 – Candlestick Charts
Candlestick charts have nothing to do with intimate dinners or fireworks although both of those could result from successful trades made using one of these charts for information. A candlestick chart shows all the same price information that a bar chart does. Or in other words, candlestick charts contain the same data as OHLC charts. The main difference is the visual. The candlesticks have bodies that actually make the chart somewhat easier to read. If you are a newbie, you will get a lot more out of a candlestick chart than any of the others and that can be valuable to you in the long run.