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A Forex Chart is a graphical representation between currency pairs and their relative price movements across varying time frames. Technical analysts and day traders use these charts to identify the trends, continuations, various patterns that can signal reversals, entry points, and exits. Several traders use these charts to determine the likely direction of a given currency pair in conjunction with other technologies like online trading to get an edge in the forex market. The most common types of forex charts are line graphs, bar, candlestick charts on any trading platform.
According to analysts, the purpose of a forex chart is to allow the trader to view the past, which can predict the future. To make it easy and convenient for their clients, many forex brokers provide free forex charting software to those with funded and open trading accounts.
Forex charts are essential for those who use their technical analysis to determine where to invest their funds and be interested in studying the latest trend. These technical analysts can reveal the latest trend using the forex.
The technicians study Forex to predict the investments to be carried out in the future beforehand. This is made possible because of the ability of the technical analysts to check and review the past and recent market prices. These analysts believe that the demand and supply forces in the market result in short-term price movements. Thus they end up concluding with the fact that the basics of assets when compared with the current balance of sellers and buyers are less relevant.
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How to study the different types of forex charts:
There are four types of charts used by forex traders, i.e., candlestick, HOLC or bar, line graph and mountain chart.
Information on each chart is given below:
Candlestick chart is used to display pricing information using long and thin bars that resemble candlesticks and each candlestick denotes the movement of price over the period of selected time. Each candlestick shows four specific prices for the currency pair, i.e., open, close, high and low.
HLOC or Bar chart:
HLOC also denotes the high, low, open, and close in the chart, the same as the candlestick chart but in a different way. Here, the bar chart is used to denote the same figures. Open price is denoted by the left vertical line, close price by the right vertical line, high price by the uppermost point of the vertical line and low price by the lowest point of the vertical line.
Line charts do not show open, high and low prices like HOLC or candlestick charts. Instead, they are used to denote only close prices for the selected time. The closed prices are joined together to make a line chart.
It is the same as a line chart, where only closed prices are marked and joined to make the line. But below the allied lines, the area is shaded, giving it a mountain-like appearance, hence the name mountain chart.
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Forex charts are in great use for determining the price by comparing the currency pairs over time. These charts are used mainly by technicians to make essential decisions in trading.