Forex Charts,technical analysis Forex Articles

Types of Forex Charts and How to Read Them

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Forex charts help traders analyze the market and anticipate what could happen next. They are a visual representation of a currency pair’s price over a set period of time. Learning how to read forex charts is a very essential step in the trading process.

What are Forex Charts?

A forex chart is a price chart that shows the historical price data for currency pairs. It is graphically depicting the historical price behavior of a currency pair across different time frames, along with technical indicators and price patterns. A forex chart shows the sequence of prices over a certain time frame.

A forex chart is the key tool for Forex Technical Analysis. 

On a forex chart, the vertical axis represents the price scale and the horizontal axis represents the time scale. Prices are illustrated from left to right across the horizontal axis and the recent price movement is at the furthest right.

How to Read Forex Charts?

By looking at a chart, you can find a group of data plotted in a general direction, which reflects the overall direction of the currency pair. The prices and dates will vary depending on the time frame you choose. Also, the more zoomed out you are, the more historical price action you will see.

Identifying trends, and knowing when they are about to reverse is the key. No matter what asset you are trading, you need to know how to read charts and price graphs. The more you understand the forex chart, the better a trader you can become.

  • If the exchange rate has fallen from left to right over a period of time, then the market is in a downtrend where sellers are in control.
  • If the exchange rate has risen from left to right over a period of time, then the market is in a uptrend where buyers are in control.

In a Bullish trend, you can notice a sequence of ascending lows and highs while in a Bearish trend you find the sequence of descending lows and highs. There is another type of trend that is known as the sideways, flat or horizontal trend. This trend is characterized by almost flat movements with convergent lows and highs. It is said to be trading in a range.

Read More Bullish and Bearish Markets: What’s the Difference?

The movement of a currency pair is measured by the “pip”, which stands for percentage in points. It is the essential unit of measurement of price movement. Most currencies are measured in four decimal numbers, except for the Japanese yen (JPY) currency pairs that are measured in two decimal places.

Types of Forex Trading Charts?

There are three main chart types that are popular among forex traders. Each chart type offers a variety of price information.

Line Chart

It is the most basic of trading charts, and the easiest for beginner traders. The chart represents only the closing prices over a period of time. In trading, the closing price is often considered the most important element in price analysis. By connecting the closing prices over a set time frame, a line chart is formed. However, this type offers no more data about the price action, meaning that it shows no highs or lows, or even the opening prices.

forex charts

Bar Chart

The bar chart includes more key information of prices. It is made up of a sequence of vertical lines where each line is a representation of trading activity. Each bar includes the high and low of the trading period, as well as the open and closing price that is represented by a side horizontal shorter line. The open price is located on the left side, the closing price is on the right side of the bar.

Bar Chart

Candlestick Chart

It is considered to be the most popular in forex charts. Candlestick charts are easy to use and also very informative when it comes to highs, lows, opening, and closing prices. It is very similar to the bar chart. The vertical lines of both charts illustrate the trading period’s price ranges, while the body of the candle represents the market changes in a time period.

Candlestick Chart

Time Frame of the Chart

They are multiple time frames that can be applied to the forex chart. Starting from only one second to a minute, hour, 4 hours, daily, weekly to monthly charts. Small time frames are more usable for scalping and day trading, while bigger time frames are used for medium and long-term trading strategies.

Time frames can be set on the trading platform, as well as the chart type. On AximTrade’s trading platform, you can simply adjust your trading chart according to your preferences and trading strategy.

Forex Chart FAQs

What is the definition of Forex chart?

The forex chart is the type of chart that shows the movement of currency pairs prices according to a timeline and volume. It is graphically designed to allow traders to monitor the price movement over time and to apply different indicators to analyze the movement.

How to find Forex charts?

Typically, the main source of forex charts is a platform of MetaTrader 4 and Meta Trader 5. This software is usually provider by forex brokers and is also available online. There are several online portals and applications which provide live forex charts such as TradingView. AximTrade provides the MT4 version for all types of devices including mobile devices.

How to use the Forex charts?

The forex charts come with several interactive tools which allow traders to implement overlays and apply technical analysis. There are built-in indicators and drawing tools which include the most common functions and there are also customized indicators to download from external resources and developers communities.

Open Trading Account And Start Investing

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