To be able to recognize opportunities and prices that arise when trading forex, you certainly need a data display that is easy to read and updated in real-time. On almost all trading platforms, you can see the data in the form of trading charts.
There are 3 types of trading charts commonly used in forex trading:
Line Chart
This type of graph is the graph with the simplest appearance. As the name suggests, the line chart only displays lines connecting the closing prices of each session. Thus, you can immediately see trends and price movements that have occurred by looking at the line chart.
Bar Chart
Bar charts are graphical displays that are more complex than line charts. If on the line chart you can only find out the price of each session in general, then on the bar chart, you can find information on the opening price, highest, lowest, and closing price.
The shape of the bar chart itself looks like a tree trunk or branches with one main trunk and two branches on either side. The branch on the left indicates the opening price while the branch on the right shows the closing price. The tips of the bars at the top and bottom show the highest and lowest prices in the session.
By using this chart, you may not be able to immediately recognize the closing price in general for each session. However, the information you get will be more accurate so that it can make it easier for you to do technical analysis.
Candlestick Chart
Candlestick or a wax chart, is the most popular chart. Most forex traders, commodities, and stocks use this chart to help them in analyzing the data. This is caused by the ease and appearance of this type of graphic that is very interesting and easy to understand and displays complete information.
According to Investopedia, many traders use the candlesticks to make trading decisions based on regularly occurring patterns.
Basically, candlestick charts display the same information as a bar chart. There are opening, closing prices, and the highest and lowest prices that occur in one session. However, the information is packaged into a graph that is more interesting and easily recognizable.
A candlestick chart has two main components, that is graph body (body) and the bar or pole graph (shadow). The top end of the bar shows the highest price achieved in the session, while the lower end shows the lowest price. Additionally, the body size and color represent the opening and closing prices are represented.
If the body of the chart is white, the closing price is higher than the opening price, Thus, the lower end of the body is the opening price and the upper end is the closing price. If the body color is black/dark, then vice versa.
At present, many trading platforms are starting to color the body of the candlestick they are displaying. Generally, the white color on the ascending chart is replaced by green or blue, while the red or black color is used to indicate the price of the decline.
What is the advantages of using candlestick charts as the trading charts?
The advantage of candlestick charts is that the information is much easier to read than a bar chart. For those of you who are just learning online trading, it will be very easy to recognize trends in passing only by looking at the color differences from this chart. Besides, many candlestick chart terms and patterns have unique names such as “Shooting Star” that make it easier to remember and learn.
Read more: 4 Kinds of Trading Fears and How to Overcome Them
