Forex traders rely on different charts to understand the market condition. It offers them relevant information that they use to build investment strategies. The Forex charts have two coordinates: the period displayed on the horizontal axis and tick volume or price shown on the vertical axis. You will often see the time divided into seconds, minutes, hours, days, weeks, and months. If you are new to Forex trading, it is essential to understand the different charts available on trading platforms.
1) Tick chart
Traders who want to see unit price changes often resort to tick charts that display the smallest scales for a specific period. Forex trading sites like EagleFX provide real-time updates on the change in the rate of the currencies. The lower part of the chart displays your bid while the upper part shows the asking price. This chart is only useful for understanding the perfect moment that will provide a better return on investment. You shouldn’t consider it as an analysis chart.
2) Line chart
Line charts display the close prices of all your previous trading periods. You will notice curves on the graph that indicate the price patterns. These charts are specifically used for analyzing short period price fluctuations. Since the graph doesn’t provide details about open prices, it is not possible to define price changes for one period.
So, if you want the ratio between all the price changes, this is not the chart you should follow. However, many traders prefer line charts because it provides a quick review of all the price changes in the past and how they placed their bids. It is a simplified chart for all your trading history.
3) Bar chart
In this chart, a vertical line connects the high prices and low prices. You also find both open and close prices for a specific period. All the shorter strips indicate open prices. On the other hand, the strips on the right-hand side reveal the close prices for a given period. One of the bars also displays changes in prices. A big advantage of bar charts is you can define the time. Several sets of bars form a graph that indicates the price movements.
The bar chart allows traders to check the price changes at regular intervals. If you miss an update, you can specify the period and watch the market condition instantly.
These charts look similar to bar charts, but here, the candle’s body represents the open and close prices. Black is the bear color, whereas white is the bull color. If the open price is lower than the close price, the candle will show white. On the other hand, if the open price is more than the close price, the candle will show black. The vertical lines on the candle are known as shadows.
All the graphs and charts in forex trading platforms have one aim: that is to help you compare your bid price with the current price. You can change the color of the charts to personalize the looks of the graphs.