A basic understanding of technical analysis can propel the novice FOREX trader from a micro account to the big leagues in record time, and it really isn't that difficult to master once you comprehend the basics. At first glance all these charts and acronyms can seem daunting and can quickly scare the average novice trader away, but it's really not as complicated as it looks. Let's take a look at the three most popular FOREX charts out there right now.
The Line Chart.
This is the kind of chart that even non-traders are familiar with. It plots closing prices from one day to the next and connects the two points with a line, forming a jagged line with peaks and valleys from left to right. The general trend of a currency pair is very easy to identify as the price will either trend up, down, or remain relatively stagnant.
The Bar Chart.
The bar chart is a glorified line chart that not only shows the closing price, but also shows the opening price that day and also the high and low that the currency pair reached that day. Picture a vertical line, with the top point of the line representing the high price traded that day, and the bottom of the line indicating the low price traded that day. Each vertical line also has a horizontal line on the left side that indicates the opening price that day, and a horizontal line on the right side that represents the closing price that day. This FOREX chart is particularly useful as it's easy to identify the long term trend of a currency pair while also seeing what kind of daily variation it typically experiences.
You'll often see bar charts referred to as "OHLC" charts - Open, High, Low, and Close, for the reasons explained above.
The Candlestick Chart.
Candlestick charts are probably the most popular type of FOREX chart used by professional FOREX traders. It combines the best elements of the line chart and bar chart and adds its own unique twist. A candlestick has a vertical line, just like the bar chart, but instead of having horizontal lines on either side that represent the open and close prices it has a rectangular box in the middle of the vertical line. The inside of this box is typically white if the price closed higher than it opened, and black if the price closed lower than it opened, although you'll see various color schemes used from site to site.
Candlestick charts don't contain any extra information than a bar chart, but visually they're much easier to understand at a quick glance. You'll find that you'll be able to identify trends much quicker and recognize market reversals much easier than if you were using a bar chart.
As candlestick charts tend to be the most popular of the FOREX charts you'll find that there tends to be a lot more information available online about them, including information on candlestick patterns. These patterns have been tweaked many times over and are very handy in identifying emerging trends in a currency or stock, and it's highly recommended that you familiarize yourself with some of the more well known candlestick patterns if you want to realize some serious profits in FOREX trading.
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