subject: Understanding The Basics Of Forex Charting In Forex [print this page] Forex charting is carried out by technical analysts who aim to forecast future market moves by studying historical data on Forex charts. This reliance on charts to forecast price direction led to early technical analysts being referred to as chartists. Forex charting uses the study of market prices to predict future trends and patterns in the market. This is the basis of technical theory in that the future market direction can be determined by the movements of the past.
There are an number of ways in which Forex charts present historical market information. Of the range of Forex charts available, the bar, line and candlestick charts tend to be the most commonly used.
A common feature of Forex charts is their ability to present market data over a range of different timeframes on the chart. Most display a range of common timeframes including 15 minutes, 30 minutes, hourly daily and monthly charts. Short term traders may reduce the granularity even further by examining timeframes such as 5 or 1 minute charts.
There are many different chart types that can be used for the analysis of market data. Below we provide a summary of the three most popular chart types used by traders.
The Line Chart
The line chart is perhaps the simplest of the Forex charts. It displays it"s data simply by connecting a number of points, such as the closing price, with a line on the chart.
Line charts offer an easy to interpret visual indication of the market movement over the selected timeframe.
Bar Chart
Bar charts offer a similar view of the markets as Line charts. However they also show the high and low that occurred within the market during the course of a day. The bar shows the high and low of the days price movements, making it particularly useful to traders who are interested in daily trading.
The Candlestick Chart
The candlestick chart is now probably the most common chart type used by Forex traders. Candle charts provide a unique visual reference of the market price action which the bar and line charts cannot offer.
They get their name form their candle shaped appearance, with the high and low of the market being represented by wicks on the body of the candle.Trading via Candlesticks is a specialist school of Forex trading which requires further attention and research prior to trading.
The type of Forex charting you use is secondary to your ability to analyse the chart correctly and it is this that will determine your trading success. Forex charting is somewhat subjective rather than a precise science. By spending time to learn about Forex charts and applying your learning to your Forex trading you will soon be able to see benefits in your trading results.
