The history of charts can be traced during the 1700s in Tokyo, Japan where rice trader plot the price of rice on paper. The price chart was used to point out any trends in price movements wherein rice traders can profit the most. The candlestick chart used in forex trading is also credited to the Japanese. During the 20th century, the ticker tape became popular with professional traders and brokers. Since computer devices weren’t popular at that time, the figures were extracted from the tape and traders create their own charts with their own hands. The charts were used to monitor any patterns or breakouts from which they can make forex decisions. Now, traders rely on technology for their forex charts.
Different Kinds Of Forex Charts
If you understand forex emotions, you’ll surely understand candlestick charts. A candlestick chart plots the foreign currency’s open, low, high, and close prices. Each plot in the chart is like a candlestick. It has a body and wicks at both ends. The body tells you the price direction while the wicks tell who the over-extension of the emotion which probably won’t last. If the body occupies a large part of the candle, it means it’s a trend candle. However, if the wick occupies a large part of the candle, it means you have to be cautious. You may have to sell your forex position.
- Bar Chart
The bar chart, on the other hand, displays the same parameters as the candlestick but is less colorful. You can use the bar chart to compare ranges. If the range is completely outside or inside a previous bar, you are put in a difficult spot of indecision. It tells you that there could be huge price movements in the near future. But, you don’t know which direction the price will take.
- Line Chart
The line chart is the simplest of all the forex charts. It shows the closing price of the foreign currency each trading day. It is used by forex traders to identify trends clearly.