Forex Chart Types Explained: Line, Bar, and Candlestick Charts

Can you not use the information published on the internet, or watch YouTube analysis videos to help you? You can be a “good” trader by reading the analysis published by other traders or websites dedicated to the Forex markets. On the other hand, a shooting star pattern’s appearance in a forex chart likely foretells the start of a bearish reversal.

Support

Traders often use this type of chart to see the general price movement or market condition over a specific period. Before learning how to read price charts, you should first have a solid understanding of each type of forex trading chart. Whether you’re glancing at a line chart for simplicity or diving into candlestick patterns for deeper analysis, forex charts are a trader’s roadmap. These charts are like the language of the forex market, helping traders analyze price movements and make informed decisions.

• While red and green or black and white are the most common colours to depict price movements up and down, these colours can be easily customised.
• Adding too many indicators can lead to confusion, so stick to a few that complement your trading style.
• A large green candlestick indicates a strong price movement to the upside, while a large red candlestick indicates a strong price movement to the downside.
• By understanding the different types of charts, selecting the right timeframes, identifying trends, and using technical indicators, you can make more informed trading decisions.
• Knowing how to read different types of forex charts is a vital skill for all traders.

→ Currency Pair

These forex chart patterns got their name because one of the two candlesticks always completely covers, or “engulfs,” the other. For this reason, learning how to read a price chart is a vital skill for anyone wanting to make money from forex trading or become more skilled at technical analysis. Forex charts visually display how currency pairs have performed over time, offering insights into trends, reversals, and market momentum. One of the most essential skills in forex trading is knowing how to read a chart.

This means there is no fixed time axis to a tick chart, so it lets a short term trader just focus on the price action. The candlestick chart is one of the most popular chart types used by traders. Although the requirements of most Forex traders are met by these Forex charts, the case is different for analysts who analyze the Forex markets. If you are a technical analyst, or if you like to research about the Forex market in-depth, then you must be aware with the Elliot Wave Theory.

How to Read a Candlestick Chart:

A solid approach is to analyze on higher timeframes, then enter trades on lower timeframes known as multi-timeframe analysis. Point and figure charts are typically constructed on graph paper by using an X to fill a rising column of boxes and an O to fill a falling column of boxes. Each box represents a specified value that the exchange rate has to attain to justify marking an X or an O on the graph. Milan Cutkovic has over eight years of experience in trading and market analysis across forex, indices, commodities, and stocks. He was one of the first traders accepted into the Axi Select program which identifies highly talented traders and assists them with professional development.

Most Forex chart patterns are a combination of channels, ranges, and triangles. To closely monitor their trading strategies, experienced traders usually require more information than a standalone line chart offers. Line charts give a clear, simplified view of the current market situation and they work best for people who want a quick glimpse of where the market is heading. A sideways trend occurs when the price moves horizontally, bouncing between support and resistance levels. Traders often avoid sideways trends or use range trading strategies to buy at the support level and sell at the resistance level. A support level is a level where the downward price trend of a currency pair pauses as buying demand increases, so the trend reverses and turns upward.

How to Read Forex Charts – A 2025 Beginners Guide

Traders use moving averages to identify trends and potential entry/exit points. Candlestick charts are ideal for traders who want detailed price information and visual clues to help identify market sentiment. Every box present in the chart is assigned a specific value, and the exchange rate is identified by the X and the O sign on the graph. If the price of a currency pair is on the rise, you will see at least three “X’s“, which indicates that the demand of the currency pair has exceeded supply. On the contrary, when you spot at least three “O’s” on the graph, it means that the supply of the currency pair exceeds its demands.

In this market theory, prices move in 5 waves in the direction of a trend, while they typically correct that trend in three waves. Although sometimes a triangle will form that tends to resolve after completing five internal waves. Prices also tend to extend and correct trends in Fibonacci ratios that lead to the computation of Fibonacci projection and retracement levels. They show you the close price for a how to read the 3 main types of forex charts given time period, typically represented by a continuous curved line that connects dots that represent the changes in price over certain intervals of time. Once you understand what a price chart visually represents, you need to know where you can find this essential tool.

• These indicators help traders identify trends, gauge momentum, and measure market volatility to improve the accuracy of trading strategies.
• In fact, an entire technical analysis science has evolved regarding specific combinations of candlesticks that have predictive value and can be considered chart patterns in their own right.
• Both of these forex chart patterns have small-bodied candles with elongated lower shadows.
• Now that we’ve explored the three main types of charting, you should be able to identify which ones suit your type of analysis the best.

Some more advanced technical analysts also look at the overall structure of exchange rate moves in an attempt to identify wave patterns using the principles of Elliott Wave Theory. Forex charts also tell you exchange rate levels the market previously reversed to the upside at and below which buyers tend to place bids. These are known as support levels, since the market finds support there when attempting to head lower. Support and resistance levels are areas where the price of a currency pair is likely to reverse or stage a breakout.

You should not feel you are attached to one chart that worked in the past if it is not longer functional. Remaining loyal to a singular form of investment is not a wise long-term investment strategy. When acquiring our derivative products you have no entitlement, right or obligation to the underlying financial asset. AxiTrader is not a financial adviser and all services are provided on an execution only basis. Information is of a general nature only and does not consider your financial objectives, needs or personal circumstances.

A line chart is the simplest type of Forex chart, displaying the closing prices of a currency pair over a specified period. It connects the closing prices with a continuous line, providing a clear and easy-to-understand overview of price movements. The Point and Figure chart is popular primarily because it allows experienced traders to gain valuable insights on different currency pairs. Additionally, this trading chart includes various filters that helps in filtering the exchange rate moves and identify everything.

Sometimes, a triangle is created to solve the problem after completing the internal waves with opening and closing prices. Ask any experienced Forex trader about a few must-have tools for Forex trading, they would certainly mention Forex charts and for the right reasons. A Forex chart is essential for Forex trading because it allows traders to have a look at the historical behavior of a currency pair across different time periods. Knowing how to read different types of forex charts is a vital skill for all traders. Line charts are perhaps the easiest forex trading charts to interpret, as they only involve the movement of a single line across a specific trading period.

→ Indicators

Candlestick charts are trickier, as there are different patterns that can be interpreted differently. This pattern is characterized by a filled (bearish) candlestick followed by a larger (bullish) hollow one. The appearance of a bullish engulfing pattern in a downward trend is a strong signal that the trend is about to reverse. Engulfing patterns are dual-candlestick patterns; that is, the patterns include two adjacent candlesticks instead of just one. In this beginner-friendly guide, I explained the different types of charts, its components, and how to interpret key patterns. Forex charts can be overwhelming for beginners, but understanding them is important for anyone venturing into the world of currency trading.

This course by Ezekiel Chew is one of the highest-rated Forex courses on the internet primarily because it is informative, and it has helped thousands of aspiring Forex traders. This chart originated in Japan and was not used in the West until the late 1980s. It was developed in Japan during the 17th century by a Japanese rice trader named Munehisa Homma. Whatever price chart you use, they are usually useful for one scenario or another.

If you track just one price on a bar chart, you could generate a line chart that helps you gather insight into the performance of the stock. Similarly, the charts also show the exchange rates where the market previously reversed to the downside. Sellers tend to exist at and just above these so-called resistance levels since the market finds resistance there to upwards moves. Exchange rate charts allow you to observe trends and other common exchange rate patterns.