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Forex Chart Types

There are three main types of charts that are used by most traders in the forex market. Two of them, bar charts and candlestick charts, display basically the same information in a different visual mediums. The other type of chart, perhaps the most common in finance and trading in general, is the simple line chart.

Line Chart

Sometimes the line chart represents the day's average price for a particular currency pair. Still other times it is the closing price. It is useful for looking at long term direction of prices and for the correlation of a currency pair with other variables, such as commodity prices or trade defects.On most good websites, any number of different variables can be grouped together to see how they correlate in the real world.

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The major strength of the line chart is that it is easy to read and spot directional changes. The major weakness is that there is no way to see daily price volatility.

Bar Chart

The next type of chart is the bar chart. Like most charts, it has two notches on it, one representing opening and one representing closing costs. The one on the left represents the opening cost, the one on the right represents the closing. The edges of each bar represent the highs and lows for the day.

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There are few advantages that the bar chart offers over the candlestick chart, other than accessibility for first time chart readers. The candlestick chart offers all the same information, but in a manner that lets the reader who is familiar with the format pick up the information in a quicker manner.

Candlestick Chart

Candlestick charts are perhaps the most popular type of chart for the forex market and forex websites in general. They instantly let a reader know what's gone on that day and where the market has moved. For more information on how to read candlestick charts, see the article, “candlestick patterns.”

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On any quality forex brokerage website, these charts can be changed around to fit your specific needs. Candlestick and bar charts can usually be arranged so their units represent anything from one minute to one year.  Line charts can similarly be manipulated.

Charting services vary in quality, and a site's graphing capabilities are one of the most important features of a website.  There are also subjective qualities to charts. Some traders prefer different color schemes or other small details that make it easier for them to read the charts. In the end, you should choose the charting service that works best for you personally, keeping in mind that your need for complexity is going to grow as you become a more sophisticated trader.