INTRODUCTION TO CHARTS
Along with fundamental analysis and research, charts will be your best tool when it comes to analysing each pair.There are 3 main types of charts you will use; line charts, bar charts and candlestick charts.
LINE CHART
This is a very simple way of reading price action and good for recognising support and resistance levels. You can see how price has moved, but this not very good to trade off as you can’t see individual price bars or candlesticks. It just looks like a messy line.
Japanese Candlestick Charts
This is what pure price action looks like, with nothing on your chart but the price (and the 3 circles and arrows we have drawn on).We go into more depth on Japanese Candlesticks later on.
The spiky lines coming out of the candles are known as the “wicks”, these tell us that the price went up to a certain level but was then rejected and closed either below or above this.
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Long or multiple wicks give us an indication of a potential change in direction. In the example above we have drawn blue circles where you can see that large or multiple wicks are followed by a move in the opposite direction.
Below is an example of what a “naked” candlestick chart looks like and will be what you see when you first start your analysis. The reason why so many people use Japanese candlesticks is that they paint a perfect picture of what’s happened. The green candles show where price moved up and the red show where price has moved down.
If on mobile, please zoom in to see better.
Bar Charts
Here we have the same chart as the previous example but in the form of a bar chart.
Bar charts are also very popular within the forex industry because again they are clear representations of what price has done.
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Explaining where it spiked and where it closed helps a trader build up their confluences and makes it easy to plot trendlines, areas of support and resistance, Fibonacci etc.
It’s important that you try each and find which works best for you.
For charts, we use a website called Tradingview this is a free site to use, and a very good charting software.