Using Forex charts for technical analysis is a great way to minimize risk and make the best trading decisions. Using historical patterns to predict future movements can lead to trouble. But historical patterns were the result of many factors, not just one. In this article, we’ll discuss each chart type in detail. These charts are incredibly useful in predicting currency exchange rates and determining when it’s time to buy and sell. You can also use them to make investment decisions.
Candlestick & Line Charts
Candlestick and line charts are two popular forms of forex charts. The difference between these two sorts lies in their level of complexity. While line charts show only one price at a time, bar charts show four prices at once. A combination of both types of charts is known as a candlestick chart, which is used for analyzing all time frames. Although bar and line charts are both popular forms of forex charts, candlesticks are the most complex.
A somewhat similar type of forex chart is the area chart. This type of chart does not show price highs and lows but rather emphasizes price action using areas. The filled areas make the price auction easier to remember. This type of forex chart is most effective when operating with trends. However, if you’re trading according to geometric shapes, a line chart isn’t for you.
Bar Chart
When analyzing the Forex market, you may have already heard of the Bar chart. It’s one of the most popular types of charts available to traders. It provides a high-level view of price action. Its bars are separated by time. Usually, traders use 15-minute, one-hour, four-hour, and daily bars. The low and high of the bar indicate the direction of the market’s price movement.
It provides plenty of information about each time period, such as the closing and opening prices. However, the relationships between these dates are often different. For instance, the closing price on one day may not necessarily reflect its opening price on the next. This big difference, known as the gap, can work against traders who aren’t able to exit a trade before it hits the bottom of the gap. As a result, the bar chart should not be used for determining stop-loss orders.
Heiken Ashi Chart
You can use the Heiken Ashi indicator on a forex chart to spot potential trends. A blue candlestick indicates a market that is reversing, while a red candle means the market is in a downtrend. Often, you can see this in a daily chart by noticing how the Heiken Ashi candlesticks form a flag. The next time you notice a Doji candle on a Heiken Ashi chart, it’s a signal to exit your short position.
A Heiken Ashi candlestick shows four levels on a daily or hourly chart. The candlestick’s value is defined by the open, high, low, and closing prices. The Heikin Ashi indicator is available through MetaTrader 4 Supreme Edition. It also has a smoothed version of the indicator that replaces the original price chart. This version of the indicator offers traders a detailed view of the market and helps them determine the best time to trade.
Area Chart
A basic overview of the six main types of forex charts is an area chart. Each type has different ways of representing data. For example, an area chart with overlapping areas represents a single bar chart, but it has areas below each line that represent different parts of the data. These overlapping areas may be partially transparent or overlapping to allow viewers to see through the larger areas. However, area charts can become complicated if they have too many data sets, so it’s best to keep the number to five or ten groupings.
Another common type of area chart is a stacked area chart. Unlike an overlapping area chart, a stacked area chart has a single vertical axis, but each line has its own unique height. Because each line is stacked around the central line, it can be difficult to gauge its exact value. A stacked area chart, on the other hand, loses trend information and has a second baseline.
