Introduction to Forex charts

As a result of period of technology we are in today, forex charting is less difficult than it was once. We have having access to nice clean price charts on our high resolution trading screens that provide us to the second updates in price changes. There are many chart formats to choose from and we can even apply our own colour schemes and backdrops to pretty them all up.

This section of the course will probably provide you with a brief summary of a several main types of charts that you will run across within your Forex trading journey. Almost most of the traders use a candlestick charts, we really feel forex candlestick charts do the best job at displaying the price dynamics inside a market, since their design allows you to picture the “force”, or lack thereof, that a particular price movement exhibited. So, let’s review the main kinds of charts that you will likely see as you trade the markets:

Line charts

line chart
Line charts are good at providing you with an easy view of general market trend as well as support and resistance levels. They’re not really practical to trade off of since you can’t see the individual price bars, but if you want to see the trend of the market in a very clear manner, you should check the line charts of your favorite markets from time to time.

Line charts are made by connecting a line from the high price of one period towards the high price of the next, low to low, open to open, or close to close. By far, line charts that show a connection from one closing price to another are the most useful and the most widely used; this is because the closing price of a market is deemed the most crucial, since it determines who won the battle between bulls as well as bears for the time period.

 

Bar charts

bar chart
A bar chart demonstrates us a price bar for each period of time. So if you are checking out a daily chart you will see a price bar for each day, a 4 hour chart will show you one price bar for every 4 hour duration of time…etc. An individual price bar provides for us four pieces of information that we may use to assist us make our trading decisions: The open, high, low, and close, you will sometimes view bar charts called OHLC charts (open, high, low, close charts), here’s an example of one price bar

Bar charts allow traders to get a better understanding of what happened during that bar’s session to make them more confident trading decisions. A new improved type of displaying these 4 points of data called Japanese candlestick charts was presented and it is used by most traders today. More on candlestick charts in the next chapter.

 

Renko Charts

renko charts
Renko Forex charting were invented by the Japanese. Renko charts implemented their name from the Japanese word ‘renga’ which means brick, because Renko charts seem like stacks of bricks.

A Renko chart still has time possitioned on its X-axis but it’s not kept in consistency like the bar and line chart. This is what makes a Renko chart unique – it just doesn’t worry about time.

This Forex charting is made up of bricks that are either bullish or bearish. A new brick will only form if price moves a predefined amount of points. If the Renko chart is set to 100 points, and price is cornered in tight consolidation for weeks no new bricks will show up within the chart. A fresh brick will only appear when price breaks or cracks outside of consolidation and starts moving more than 100 points. The renko chart doesn’t care if this takes 1 minute or a month.

Candlestick charts

candlestick chartCandlestick charts display exactly the same information as a bar chart however in a graphical format that’s more pleasurable to view. Candlestick charts indicate the high and low of the given time period just like bar charts do, having a vertical line. The top vertical line is known as the upper shadow as the bottom vertical line is known as the lower shadow; you could also see the upper and lower shadows called “wicks”. The main difference lies in how candlestick charts display the opening and closing price. The big block in the center of the candlestick indicates the range between the opening and closing price. Traditionally this block is known as the “real body”.

Candlestick charts are classified as the most popular of the fourth major chart forms, and thus, those are the type you will see most often while you trade, and they’re even the type I suggest you use when you learn and trade with price action methods.

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