Types Of Charts And Their Significance In Trading

To those into Financial Planning and Forex Trading Strategies or currency traders, they are blessed with a range of charts highlighting different aspects but here, we specifically harp upon three major charts which frequently surface before us every time we take a dip into Forex trading, i.e. Simple Line Chart, Bar Chart and the Candlestick Chart and with each of such charts, there are advantages and disadvantages and then, disadvantages can be converted into advantages given expert guidance is given to it.

Line Charts

The line charts represent closing prices which are highlighted through lines drawn out there. Such is hailed to be the most fundamental type of charting which traders across the spectrum are clearly familiar with. Taking a closer look at the chart will reveal that every closing price for each period is highlighted with a dot, such as a closing day, after which, dots are linked forming a clear line on the chart.  Through this, we come to know where the market closes on each working day and hence, analysis becomes a cakewalk. Besides, one also gets to know about the prevailing trend(s) and the overall performance of the market, if good or bad. Line charts are not comprehensive in revealing info but for traders who follow the certain trend and who rely upon scores of small positions, such charts give ample info. Then, even to fundamental traders with sufficient experience, line charts are considered to be sufficient. In the following diagram, we try to explain the line chart for EUR?USD pair.

Bar Charts

Such charts also find an easy preference among traders in Forex Trading and currency markets and professionals have laid special emphasis upon such charts for decades. Such are widely in use in other markets too, as the Stock market, commodity market, and among trading veterans, Bar Charts find a special place during considerations and decision making. Away from the Line Chart, Bar charts reveal much info than closing time.

In the following diagram, this chart shows EUR/USD pair which we just zoomed-in inline chart but on closer look, you will find nuances in the bar chart. Clearly, each of the bars put forth a vertical line accompanied by horizontal “ticks” on either side. This is how the bar chart is a bit different from the line chart which clearly enhances its utility and purpose, as, on the left side of I (the bar), the tick indicates the opening price and the tick on the right side of I, is an indicator of the closing price. The bar, i.e. I, keep on increasing and decreasing, which refers to the day. Or we can say, if the right-hand tick is found to be lower than the left-hand tick, it means the closing price was recorded higher than the opening price, which again means that the asset worth and value has risen.

Insightful traders can easily figure out the scenario and can decide if they should accept the profits or losses also. For instance, if some bar shows that we have closed higher than the open, but profits were given away during that tenure, such may show the signs of exhaustion which are opposite to any line chart and which would enable “a mild higher bump”. As such, bar charts are widely used and remain in demand even more than line charts since sluggish momentum is shown while line charts can never show such notable aspects.

Candlestick Charts

Such charts have found immense traction among traders and especially in the past 2 decades, Forex Trading and currency markets mostly focus upon this. Candlestick charts provide info just like bar charts but with aligned with colour coding where users are enabled to locate the trends much quicker. By and large, traders harp upon bar chart or the candlestick chart for a similar effect. But such a simple to understand as the chart shows red and green patterns or sometimes black and white, where green signifies the appreciation of price during a particular period. Conversely, the red part indicates the slip in prices. Then, in black and white colour portion, white candlestick embodies hope and bright business aspects while the black stands for gloom and negative side of the business.

As there is mentioned earlier, the similar piece of info is also secured from a bar chart and then, candlestick chart becomes way too important only due to details as we get to know, where we made an opening and closure during a specific time frame. In candlestick, the thick body’s top refers to one of the tics that is usually shown in the bar chart while its bottom is also visible. Furthermore, thick body candlestick’s top is the ticks visible to us in the bar chart and so is its bottom.  Then, through the colour of the body, we can assess if it is closed and is opened, like if the body appears red, meaning that opening price dominates the body and at the bottom, we can get the closing price at and this whole situation makes the candlestick a nasty and dicey situation to be at.

Then, as for the high and low of candle, we can get to know about it through “wicks” present on the candlestick which gains momentum from the body and either surges higher or plummets lower but it all rest upon the actual aspect or orientation of the candlestick that we discuss.

One of the major advantages of sticking onto candlestick charts remains that if scores of green candles are found in a line, it should be easy and simple to have a look at the chart to understand it fully as it symbolizes a running trend. Even though there are scores of patterns which become the major point of discussion among traders such as “spitting top”, “shooting star”, candlestick which is bearish and so forth, but then, every such pattern is equally represented by a counter pattern that prevails on the bar chart.

Conclusion:

In understanding the market and trends, we can easily figure out through charts but then, it should be left upon the traders to select and use the one which they find the best and swift to understand and to operate. Nevertheless, in Investing Forex and Financial Investment and planning, candlesticks charts can be used to unearth the market sentiments and in which direction does it move. For expert guidance please rely upon DICNOFX expertise as a noticeable Forex and Crypto-Currency player in the industry with global recognition.