Forex trading is a very organized and systematic business realm. You can never learn or know everything about Forex trading. Even the top Forex traders are always learning new things.
Forex graphs are a rich source of important information that allows you to understand the trading process better. Graphs are directly related to forex trading, and this article explains how to study them. Stick around until the end and learn from us.
What are Forex trading graphs?
Before we move any further, let us cover the basics for our new traders. Several traders ask what Forex trading graphs are and what types are there.
Forex graphs represent the previous activity of relative price changes between currency pairs over different time periods. Technical analysts and day traders can use these graphs to identify trends and various patterns that may indicate;
- Entry points
Many traders use forex trading graphs to determine the likely direction of a particular currency pair, combined with other methods such as forecasting software and online trading to gain an advantage in the forex market.
Types of forex price graphs
Let’s look at the three most popular types of price graphs:
- Line graph
- Bar graph
- Candlestick graph
Now let us explain these forex graphs and tell you how you should read each graph.
A simple line graph draws a line from one close to the next on a graphical plane (X-Y axis plane).
When we follow the line on a Forex graph, we can get the overall price movement and information of the currency pair over time.
It’s very easy to understand and the simplest form of a Forex graph. However, a line graph may not provide traders with detailed information about price action over a given period. All you know is that the price closed at X at the end of the graph. You don’t know what else happened during the trade session.
A line graph does help traders more easily see trends and visually compare closing prices from one session to the next. This type of graph is often used to get the “overall view” of price movements.
Line graphs also show the best trend, which is just the slope of the line. Some traders believe the close is more important than the open, high, or low. Focusing only on closing prices ignores price fluctuations during the trading session.
Bar graphs are a little more complicated but offer better information. They show the opening and closing prices of the currency pair and the high and low prices.
The bottom of the vertical bar shows the lowest traded price for the period, while the top shows the highest price. The vertical bars indicate the overall trading range of the currency pair. The bar’s left is a horizontal hash showing the opening price. On the right is a horizontal hash that shows the closing price.
Bars are scaled up or down from one column to the next or columns in a series. The horizontal hash to the bar’s left is the opening price, and the horizontal hash to the right is the closing price.
Like other Forex trading graphs, the candlestick graph indicates trading ranges from high to low with vertical lines.
This graph is suited for traders who prefer more information. These graphs also use a block in the middle to indicate the interval between open and close. The currency pair closes below the opening price if the middle block is filled or shaded. On the other hand, blank or different colored middle blocks indicate that the closing price was higher than the opening price.
Candlestick graphs are relatively easier to interpret and are a great place for beginners to figure out chart analysis. Your eyes adjust almost immediately to the information in the bar symbol of candlesticks in a graph.
We recommend our readers get better at understanding and learning Forex graphs. Whatever graphs help you understand the market better is fine. But it is advised to periodically look at different graphs from different sources to develop a deep insight into the market. Several brokers offer graphical analysis of a trading session on their platform. You can also watch some video guides and learn how the experts read the Forex graphs.