Forex trading is a complex world that involves a lot of technical analysis and graphical representation of data. One of the commonly used chart types in forex trading is the bar range chart. In this article, we will explain what a bar range chart is, how it works, and how it can be used in forex trading.
What is a Bar Range Chart?
A bar range chart is a type of chart used to depict the price movement of a financial asset over a specified period. It is also known as a range bar chart. The chart is made up of vertical bars that represent the price range of the financial asset in question. Each bar represents a specific time interval, such as a minute, an hour, a day, or a week.
The vertical bars in a bar range chart are composed of a range of prices, starting from the lowest price to the highest price. The length of the bars represents the price range of the asset during the specific interval. The longer the bar, the greater the price range of the asset within the interval.
How Does a Bar Range Chart Work?
Bar range charts are constructed based on price movements rather than time movements. The chart plots the price movements of an asset over a specified period, regardless of how long it takes to move from one price level to another. This makes bar range charts different from other chart types like line charts, which plot the price movements over time.
Bar range charts are designed to help traders identify the price range of an asset, as well as its overall trend. The bars are color-coded to indicate whether the closing price of the asset is higher or lower than the opening price. If the closing price is higher than the opening price, the bar is usually colored green, while a red bar indicates that the closing price is lower than the opening price.
Bar range charts are also useful in identifying support and resistance levels. Support levels are price levels where the asset’s price is expected to stop falling and start rising, while resistance levels are price levels where the asset’s price is expected to stop rising and start falling.
How Can Bar Range Charts be Used in Forex Trading?
Bar range charts are useful in forex trading for several reasons. Firstly, they provide a clear representation of price movements, making it easy to identify trends and patterns. Traders can use this information to make informed trading decisions, such as entering or exiting a trade.
Secondly, bar range charts are useful in identifying support and resistance levels. Traders can use this information to set stop-loss orders or take-profit orders. Stop-loss orders are designed to limit the trader’s losses if the asset’s price falls below a certain level. Take-profit orders are designed to lock in profits if the asset’s price rises above a certain level.
Thirdly, bar range charts are useful in identifying price breakouts. A price breakout is a situation where the asset’s price moves above or below a key resistance level. Traders can use this information to enter into a trade and take advantage of the price movement.
Conclusion
Bar range charts are a useful tool in forex trading. They provide a clear representation of price movements, making it easy to identify trends, support and resistance levels, and price breakouts. Traders can use this information to make informed trading decisions and maximize their profits.
