Forex trading is a highly lucrative and complex trading activity. With the continuous fluctuations in the forex market, traders need to have a deep understanding of the market and use the right resources to make informed decisions. One of the most important resources that traders use in forex trading is charts. Charts provide a visual representation of the market trends and patterns, which helps traders make better decisions. However, not all charts are equal, and traders need to know which charts to use for forex trading. In this article, we will discuss the charts that traders should use for forex trading.
1. Line Charts
Line charts are the most basic and simple charts used in forex trading. They provide a visual representation of the price movement of a currency pair over a specific period. Line charts provide traders with a quick and easy way to monitor price movements and identify trends. They are best used for short-term trading, where traders need to make quick decisions based on price movements.
Line charts are created by plotting the closing price of a currency pair at the end of each trading session. The resulting line connects the closing prices, providing traders with a visual representation of the price trend. Line charts are best used in conjunction with other technical analysis tools, such as moving averages, to identify trend reversals and support and resistance levels.
2. Bar Charts
Bar charts are a more advanced type of chart used in forex trading. They provide traders with more detailed information on the price movement of a currency pair. Bar charts provide traders with information on the opening and closing prices, as well as the high and low prices for a specific period.
Bar charts are created by plotting a vertical bar for each trading session, with the top of the bar representing the highest price of the session, and the bottom representing the lowest price. A horizontal line on the left side of the bar represents the opening price, while a horizontal line on the right side of the bar represents the closing price.
Bar charts are best used to identify trends, support and resistance levels, and chart patterns, such as head and shoulders and double tops/bottoms.
3. Candlestick Charts
Candlestick charts are the most popular type of chart used in forex trading. They provide traders with a more detailed and comprehensive view of the price movements of a currency pair. Candlestick charts provide traders with information on the opening and closing prices, as well as the high and low prices for a specific period, similar to bar charts.
Candlestick charts are created by plotting a vertical line for each trading session, with the top of the line representing the highest price of the session, and the bottom representing the lowest price. A rectangle, known as the body, is then drawn between the opening and closing prices. If the closing price is higher than the opening price, the body is colored green or white, indicating a bullish trend. If the closing price is lower than the opening price, the body is colored red or black, indicating a bearish trend.
Candlestick charts are best used to identify trends, support and resistance levels, and chart patterns, such as engulfing patterns and doji patterns.
4. Renko Charts
Renko charts are a unique type of chart used in forex trading. They provide traders with a visual representation of price movements using bricks or blocks. Renko charts are created by plotting a brick or block for each price movement, with the size of the brick or block determined by the trader’s preference.
Renko charts are best used to identify trends and support and resistance levels. They are also useful for traders who prefer to trade based on price action.
Conclusion
In conclusion, forex traders need to use the right charts to make informed trading decisions. Line charts are best used for short-term trading, while bar charts are best used to identify trends and chart patterns. Candlestick charts are the most popular type of chart used in forex trading and provide traders with a comprehensive view of price movements. Renko charts are a unique type of chart used to identify trends and support and resistance levels. Traders need to experiment with different types of charts to find the ones that work best for their trading style and preferences.
