Forex charts serve for displaying and analyzing the price dynamics of a financial instrument over time. All of them are built based on a specific time. Before studying the charts, one should consider the time intervals used to build them.
The MT4 trading terminal provides the possibility of displaying the charts of nine different periods - from minute to monthly. The period determines the data compression: the smaller the period, for which the graph is drawn, the fewer data are compressed and the more detailed it is.
Each period is characterized by the opening price (open), maximum price (high), minimum price (low) and closing price (close). OHLC abbreviates this set of characteristics.
The tick chart should be noted separately. Its scale is equal to one tick, i.e. a single Sell and Buy price quote). The tick chart shows changes in Bid and Ask quotes.
Types of FOREX charts:
Only one price from OHLC is used to draw a linear graph. The selected price characterizes each period. Usually, the closing price is used as the most significant price, and it is the closing price that is used to build a linear chart in MetaTrader.
Advantages of the graphics: simplicity, convenience, no excess information;
Disadvantages of the chart: many price movements are overlooked; it is impossible to monitor the presence of gaps.
The bar chart shows the dynamics of a financial instrument in the form of rods - bars that correspond to the rate fluctuations for each equal period. All four OHLC prices are used to build such a chart. Here you can see characteristics for each time interval. In essence, the maximum and minimum prices correspond to the vertical line, and the opening and closing prices are marked with strokes to the left and right of the vertical line, respectively.
Advantages of the chart: you have complete displayed information (unlike the linear one, the bar chart displays all price movements); possibility to determine the trading range.
Disadvantages of the chart: the difficulty of period estimation (visually less convenient to determine whether an asset has risen in price over a certain period or fallen?); an oversupply of information.
Candlestick chart (Japanese candlestick chart)
This type of chart shows changes in the symbol rate in the form of candlesticks. All four OHLC prices are also used to draw a candlestick chart. Usually, a candlestick chart consists of a body (thick part) and two thin slices. A candlestick with a filled body indicates the growth of the rate for a given time, a candlestick with a hollow body indicates a fall.
Advantages of the chart: the convenient display of price information in terms of its visual perception.
Disadvantages of the chart: Oversupply of information.
Other types of Forex charts
The described types of charts - line chart, bar chart and candlestick chart - are the main and most frequently used by traders. But there are some more "exotic" Forex charts, which have not found full application among traders. These include:
Renco charts show price changes in the form of diagonal rows consisting of rectangles ("bricks"). Each new box is always displayed to the right of the previous and is located above or below it. The negotiated price movement upwards (for example, every 10 points) is marked by adding the last transparent box above and to the right. In contrast, downward movement is marked by adding the previously painted rectangle below and to the right.
Advantages of the chart: visualization of the primary trend by averaging the price; ignoring the time.
Disadvantages of the chart: many price movements are overlooked; it is impossible to monitor the presence of gaps; it is impossible to identify the minimums and maximums of individual intervals.
The diagrams show price changes in the form of a series of vertical lines of different thickness, connected by short horizontal segments. Kagi line is extended after the price in the same direction until the trend changes its direction. After breaking the trend in price movement, the chart makes an indent to the right and begins drawing a new Kagi line in the opposite direction, which is connected to the previous track by a horizontal bar at the place of reversal.
Advantages of the chart: visualization of the primary trend by averaging the price; time disregard.
Disadvantages of the chart: many price movements are overlooked; inability to monitor the presence of gaps; failure to identify the minimums and maximums of individual intervals.
The existing types of Forex charts and their combinations allow choosing precisely the kind of price information presentation. It will correspond to the needs and demands of every analyst, who is interested in financial markets, their dynamics and possibility to profit from currency and financial instruments trading.