Forex Price Charts

Some Forex traders say the best indicator is price. Therefore many traders use chart patterns with the help of technical indicators trying to predict the price movement. This approach is quite different from the fundamental analysis when price is predicted based on economic news and social events.

Technical analysis includes studying the price charts and applying different types of technical indicators. In order to learn to base your trading on technical analysis you need to look at the historic data and try to recognize patterns of forming certain tendencies. If you learn to do that you can predict the price in real time. Now you can make trading decisions based on these predictions.

The following three chart types are widely used:

- First chart is called line chart

The name of line chart tells it all. It is a line connecting the closing prices. Ups and downs of that line show the movement of the currency pair. Unfortunately this type of price does not show you any information on price behavior within the time period. You can see only the close price.

- Bar chart is the second one

Unlike the line chart, bar chart is represented by vertical lines that are called bars. The highest price during that time period is represented by the top of the bar. The lowest price is represented by the bottom of the bar. There are two horizontal bars. The one at the left side is opening price and short bar at the right is closing price during that period of time.

Since they show the open, high, low and close, bar charts are also sometimes called OHLC charts.

- Third type of charts is candlestick chart

The information presented on the candlestick chart is the same as information on bar chart. The only difference it is graphically better shows the tendency inside the time period.

You have the same vertical line with the high at the top and the low at the bottom, but there is also a wide block in the middle showing the gap between the opening and closing price. The blocks will be filled white (for a rising price) and black (for a falling price) or more often these days they are colored. Colors can vary but a common combination is green or blue for rising and red for falling.

Most people prefer candlestick charts over bar charts because they are easier to interpret. It is much easier to see turning points in the market using candlestick charts. You can immediately see where the market reversed from an upward to a downward trend and vice versa.

When you see a trend forming, you can make money by trading in the same direction as the emerging trend. ‘The trend is your friend’, as currency traders say. For this reason, identifying the trend is the most important thing to learn in Forex technical analysis and using candlestick charts is probably the easiest way to do this.