The Characteristics Of Bar And Candlestick Charts.
Many Forex traders rely heavily on technical analysis using price charts. It is important to understand this important tool to minimize risk and maximize profits.
The two most common types of price charts used in Forex trading, are the Bar Chart and the Candlestick chart.
Bars Charts show price bars as a linear representation of a period of time. This period might be one minute, five minutes, or ten minutes for short term traders or one day, one week, or one month for long term traders. Traders may also look at various time periods to help them estimate future price movements.
Each bar has similar characteristics irrespective of the time interval and allows the trader to digest a lot of information with a quick glance.
The highest point of the bar represents the highest price that was achieved during that time period.
The lowest point ofthe bar represents the lowest price during the same period.
Regular bars display a small dot on the left side of the bar which represents the opening price of the period and the small dot on the right side represents the closing price of the period.
Thus each bar shows the open, close, high and low prices for each time period in a continuous flow of time that can be digested in a brief look.
Candlestick charts represent the same information as Price bars in a slightly different form that many traders find more appealing. The open and close for the period are enclosed in a box that resembles a candle and is color coded. Generally red or black is used on down days when the close is below the open. Green, white, or blue is used on up days when the close is above the open. If the box has a line going up from the candle, the top of the line represents the high and the top line is called the wick. If the candle has a line going down from the box, the bottom of the line represents the low and the bottom line is called the tail of the candle. Many candlestick patterns have been identified to help predict future price movements. Candlestick charts provide a lot of information with just a quick glance at the chart.
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