Beginner – 3 Types of Forex Charts and How to Read Them

Beginner – 3 Types of Forex Charts and How to Read Them

Jan 06,2020

Let’s look at the three most popular types of forex charts:

  1. Line chart
  2. Bar chart
  3. Candlestick chart

Now, we’ll go into the explanation for each of the forex charts, and let you know what you should know about each of them.



Line Charts

A simple line chart draws a line from one closing price to the next closing price.

When strung together with a line, we can see the general price movement of a currency pair over a period.

Here is an example of a line chart for the pair of EUR/USD:



Bar Charts

A bar chart is a little more complex. It shows the opening and closing prices, as well as the highs and lows.

The bottom of the vertical bar indicates the lowest price traded for that time period, while the top of the bar indicates the highest price traded.

The vertical bar itself indicates the currency pair’s trading range.

The horizontal hash on the left side of the bar is the opening price, and the right-side horizontal hash is the closing price.

Here is an example of a bar chart for the pair of EUR/USD:

A bar is simply one segment of time, whether it is one day, one week, or one hour.

When you see the word ‘bar’ going forward, be sure to understand what time frame it is referencing.

Bar charts are also called “OHLC” charts, because they indicate the Open, the High, the Low, and the Close for that particular currency.

Here’s an example of a price bar:

Open: The little horizontal line on the left is the opening price

High: The top of the vertical line defines the highest price of the time period

Low: The bottom of the vertical line defines the lowest price of the time period

Close: The little horizontal line on the right is the closing price


Candlesticks Charts

Candlestick charts show the same price information as a bar chart, but in a prettier, graphic format.

Candlestick bars still indicate the high-to-low range with a vertical line.

However, in candlestick charting, the larger block (or body) in the middle indicates the range between the opening and closing prices.

Traditionally, if the block in the middle is filled or colored in, then the currency pair closed lower than it opened.

In the following example, the ‘filled color’ is black. For our ‘filled’ blocks, the top of the block is the opening price, and the bottom of the block is the closing price.

If the closing price is higher than the opening price, then the block in the middle will be “white” or hollow or unfilled.

We simply substituted green instead of white, and red instead of black. This means that if the price closed higher than it opened, the candlestick would be green.

If the price closed lower than it opened, the candlestick would be red.

Here is an example of a candlestick chart for the pair of EUR/USD. 

The purpose of candlestick charting is strictly to serve as a visual aid, since the exact same information appears on an OHLC bar chart.

The advantages of candlestick charting are:

Candlesticks are easy to interpret, and its a good start for beginners to figure out forex chart analysis.

Candlesticks and candlestick patterns have cool names such as the “shooting star,” which helps you to remember what the pattern means.

Candlesticks are good at identifying market turning points – reversals from an uptrend to a downtrend or a downtrend to an uptrend. You will learn more about this later.

Now that you know why candlesticks are so cool, it’s time to let you know that we will be using candlestick forex charts for most, if not all of forex chart examples on this site.

Share :

Follow Regain capital

latest articles