Forex

Charts are one of the most commonly used indicators for trading Forex. Charts are developed based upon the market action of any currency pair. The various types of chart used in Forex trade are Line Chart, Point and Figure Charts, Bar Chart and Candlestick Chart.

Line Charts are the simplest forms of charts. The line chart is drawn in most cases by forming a line based upon the closing prices of every 5 minutes. The line chart is a simple tool which can be used for setting support and resistance levels.

Point and Figure Charts show the trends in price of a currency pair. They are not based upon time. This chart is used to filter out any non significant price movements that happen in price movements. The increases in price are denoted by rising stacks of “X” and the declines in price are marked by declining stacks of “O”. Traders place orders when prices move beyond the identified support/resistance levels. The Bar chart is a chart which again uses time as a parameter for drawing the trend line. The 3 rates that are charted in a given time frame are the high, low and closing price. Some bar charts also track the “Opening Rate for Interval”. These are called as OHLC in forex parlance.

Candlestick charts are based upon an ancient Japanese method of price tracking. The Candlestick chart tracks the Open, High, Low and Closing Rates. An empty candle will represent rise in prices while a dark candle will represent fall. Traders can place their orders depending upon whether the price of a currency pair is in an uptrend or a downtrend.