Types of Charts

Today we are to discuss the various types of charts and how to recognise them and with no time to waist lets start.

Each chart type has two axes with the vertical axis representing the value of the trading instrument and the horizontal axis representing time. On our trading platform we have three available chart types.

The first would be the line chart, which practically consists of a simple line connecting the value of the trading instrument at certain moments of time. It’s considered the simplest of the three chart types, yet also the with the lowest amount of information.

The second chart type would be the bar chart.  In this type of chart bars are used to depict the value of a trading in a certain period of time. Each bar represents the range of values for a trading instrument for a certain period of time. Each bar may represent the range of values for a minute, an hour, a day or even a month, depending on what timeframe your chart is. Each bar consists of a vertical line and two horizontal smaller lines connected to the vertical one. The horizontal line on the left side of the vertical one represents the starting value of the instruments trading for the given period of time. On the other hand the horizontal line on the right side of the vertical line represents the exit point.  For better visualisation the bars are coloured. There are two types of bars, the bullish bar and the bearish bar. The bullish bar shows us that the price has risen and it’s entry point, the left side horizontal line is always lower than the right hand side horizontal line, as in the course of trading the instrument’s value, whether that is a share or an FX pair, has risen. Usually, without that always being the case, a bullish bar is depicted in a green colour helping the user to understand that it’s bullish bar, without having to see what the entry price and the exit price of the trading instrument actually was in the particular trading period the bar represents. The second type of bar is the bearish bar, at which the entry value is always higher than the exit value for he trading period the bar represents, as the bar shows a drop of value of the trading instrument and usually is coloured in red, although that is not always the case and the user can customise the colours in the MT4.

The third type of chart is the candlestick chart, which is considered to be visually superior to the other two forms of charts. The candlestick comprises practically from a rectangle in the middle and two vertical lines, one on the top of the rectangle and one on the bottom of the rectangle. Once again we have two types of candlesticks. The bullish candlestick which is usually depicted in green, and shows that the value of the trading instrument has risen. In this case the opening value is at the lower end of the rectangle and the closing value at the top of the rectangle not taking into account the vertical lines prementioned. The bearish candlestick which is usually depicted in red and shows that the value of a trading instrument has dropped in the period of time the candlestick represents. In this case the higher end of the rectangle show the opening price and the lower end the closing price as in a bearish candlestick the value of the trading instrument has dropped. Overall the rectangle represents the price action between the open and the close and is called the main body of prices, while the vertical lines above and below the rectangle represent still valid prices, yet higher or lower than the open or close prices and are called shadows.

On the next lesson we are to discuss the importance of timeframes for charts and trading.