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Types of charts commonly used in forex trading

15 April 2022, 00:13 CET
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The trading industry has evolved significantly over the past decade with multiple technologies and techniques being incorporated on a regular basis.

To examine the value of a particular currency that keeps on fluctuating, traders need a mechanism to look at its history and present pricing patterns. A chart, or more precisely, a price chart, is the primary instrument that every operator working with technical analysis must be able to comprehend. A chart is basically a visual depiction of the value of a nation's currency over a certain time frame. There are numerous types of charts that allow a trader to deal more efficiently in forex trading as it depicts the trading activity that occurs during a particular trading session. People interested in joining this industry must learn forex trading techniques including the charts to kick-start their career in this domain.

Price fluctuations are a sequence of primarily random occurrences, therefore the goal is to control risk and gauge severity, and charting may help with that. Here is the list of some most commonly used charts in forex trading:

  • Line Chart: A basic line chart creates a straight line from one trading session to the next. We can observe the overall price fluctuation of a currency pair over time when it is connected along with a line. The line chart is straightforward to understand, but it may not give the operator much data regarding price behavior over time. However, it allows the trader to more quickly spot trends and graphically contrast the current value from one session to another. This sort of chart is typically used to provide a broad overview of price fluctuations. The line chart also best displays trends, which are just the slope of the line.
  • Bar Chart: A bar chart is a bit more complicated. It displays the open and close rates, as well as the peaks and valleys. A trader can examine the pricing structure of each session using bar charts. The bottom of the vertical line indicates the initial traded price during that time span, while the peak represents the maximum bid received. The vertical bar represents the currency pair's overall target range.

The bars get bigger as the price variations become more erratic. The bars get narrower as the price swings become less. The variation in bar size is caused by the way every bar is built. The vertical height of the bar represents the pricing structure between the top and bottom of the bar interval. With linked line segments, the pricing bar also displays the period's starting and ending prices.

  • Candlesticks Charts: The candlestick chart is a type of bar chart. Candlestick charts display similar pricing data as bar charts, but in a more visually appealing manner. Most traders prefer this chart since it is not only visually appealing, but it is also easier to interpret. Candlestick bars still use a vertical line to represent the large variation. In candlestick charting, the bigger component in the center represents the pricing structure between the starting and closing values. It aids in the visualization of mood by portraying bodies in various hues.

Finally, it is up to the trader to determine which Forex chart styles are most suited to their trading preferences. With so many charts available, there is always a scope for improvement as every chart is designed to cater to a particular conceivable trading approach. So, choose wisely!

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