Forex Charts Every Trader Should Know

In this article, you'll explore the most popular Forex charts and the information they offer.

You'll also learn about the advantages and disadvantages of various Forex charts, helping you select the one that best fits your trading strategy.

Let's dive in!

Introduction

The chart is a visual representation of the price movement of a given instrument over a certain period. Trading platforms offer different types of Forex charts.

It's important to recognize that, in addition to their type, charts are also categorized by time. This classification depends on the period over which the candles or bars are created, or the elements that make up the charts.

You'll see what I mean further down in the article.

Each chart can be viewed in a different time frame.

The most common ones are:

• M1;
• M5;
• M15;
• M30;
• H1;
• H4;
• D1;
• W;
• M.

Some trading platforms have one-second, three-minute, six-hour, twelve-hour, etc. time frames. To clarify the role of the time frame in relation to the chart, I'll provide an example using a bar chart.

If we look at the H1 chart (one-hour time frame), it means that one bar is formed in one astronomical hour. Respectively, D1 means that one bar is formed in one day - 24 hours.

Therefore, a one-day bar contains 24 one-hour bars. Similarly, within a one-hour bar, you have four fifteen-minute bars, two thirty-minute bars, sixty one-minute bars, and so on.

This rule does not apply to all types of Forex charts!

Some are not formed by time but by the number of traded contracts or concluded transactions. Others use mathematical algorithms to ignore the influence of time.

With the basics covered, we can now dive into the specific Forex charts—exploring what they are, how they are created, and the information they offer.

Tick chart

Tick charts generate a new period (candle, bar, etc.) each time a specific number of trades occur.

Unlike time-based Forex charts, where a new period is created after a set amount of time, as explained earlier in the introduction.

Many beginner traders may believe this is a minute chart, but that is not the case.

The tick chart is very similar to the volume chart, so to clarify the differences, I will compare the two.

On the 1000 tick chart, the period is formed every 1000 trades, regardless of how many contracts are traded.

In contrast, on a volume Forex chart, each period is based on a specific number of contracts, regardless of how many trades there are within those contracts.

Example:

• A 10,000 volume chart, forms one period when 10,000 contracts are traded. This can be done with one or several transactions (trades);
• A 10,000 tick chart, forms one period on every 10,000 trades. You could have 1,000 or 100,000 contracts in these 10,000 trades.

The contract represents the number of currency units traded. In the Forex market, one standard contract is 100,000 units of the base currency.

The contract is better known as a "Lot".

Learn more about the "Lot" in this article:

>> Money Management in Forex: A Complete Guide

It's important to understand that the chart reflects the traded volume specific to the broker, bank, or similar entity. A Forex broker cannot display the total traded volume of the entire Forex market; it only shows the trades executed by its own clients.

Line chart

A line chart is the simplest method for visually representing price movement. It connects each closing price with the next, forming a continuous line.

Certain platforms offer options to base the calculation on the opening price, highest price, or lowest price by adjusting the calculation formula.

A line Forex chart illustrates the overall price movement over a period of time. As the most basic type of chart, it provides limited information.

Here’s how a line Forex chart appears on the MetaTrader platform.

The upcoming charts offer more detailed information for traders and are more engaging.

For a comprehensive overview of the MetaTrader trading terminal, check out our detailed guide to get started with trading!

Bar chart

The bar chart is a bit more complicated but gives us more information.

It shows the opening and closing prices of each period, as well as the highest and lowest value for that same period.

Open | High | Low | Close

This is what the Forex bar chart looks like on the MetaTrader platform.

The chart is made up of units called bars.

Each bar displays four values: the open price, high, low, and close price. Although it's uncommon in the Forex market, in other markets and assets, these four prices may be the same, indicating that the price remained unchanged during that period.

Additionally, each bar represents a specific time period, such as 1 minute, 1 hour, 1 day, or 1 month. This indicates that the bar is created over that duration.

When referring to a one-hour bar, it means that the bar spans exactly one hour from opening to closing. Each one-hour bar is composed of sixty one-minute bars, four fifteen-minute bars, and so on. Similarly, a one-day bar includes 24 one-hour bars and 6 four-hour bars.

The same logic applies to all time frames.

In the image below you can see an example of a bullish and bearish bar.

• HIGH: the top of the vertical line marks the highest price for the period;
• LOW: the bottom of the vertical line marks the lowest price for the period;
• OPEN: the horizontal line on the left shows the opening price;
• CLOSE: the horizontal line on the right shows the closing price.

The easiest way to remember them is to know that:

• If the right line is higher than the left, then the bar is bullish;
• If the right line is lower than the left, then the bar is bearish.

Candlestick chart

A candlestick chart gives the same information as a bar chart but its visual presentation is better.

It is also known as a "Japanese candlestick Forex chart".

Unlike the vertical line seen in bar charts, candles feature a rectangle known as the body. The body represents the opening and closing prices of the candle. The highest and lowest values are shown by the shadows, also referred to as wicks.

Not every candle has to have wicks. For example, if the opening price matches the lowest price of the bullish candle, then there will be no wick below the candle body.

If the opening price matches the high of a bearish candle, then there will be no wick above the candle body.

Here are examples of bullish and bearish candles.

Another notable feature of candles is the ease with which you can differentiate between a bearish and a bullish candle due to their colors and shape. Trading platforms typically offer options to customize the colors of the candles to suit individual preferences.

Usually, the bullish candle has a lighter color than the bearish one. By default, bearish candles have black bodies or darker, and bullish candles have white bodies or lighter.

This is what a Forex candlestick chart looks like on the MetaTrader platform.

Advantages of the Forex candlestick chart:

• Candles are perceived better visually;
• Chart analysis is easier;
• Highly recommended for beginner traders;
• Easier to spot chart patterns.

The Forex candlestick chart is the most popular among traders due to its superior visual representation. Additionally, candlestick patterns can help forecast future price movements.

How does it work?

Traders pay close attention to the size of the candles, the presence and length of wicks, and the sequence of candlesticks. This sequence is crucial for predicting price direction. Japanese candlestick patterns and formations are used for this purpose, with formations consisting of multiple individual candlestick patterns.

These are some of the most famous Japanese candlestick patterns:

• Doji;
• Morning star;
• Hammer;
• Hanging man;
• Harami;
• Three white soldiers;
• Spinning top;
• Bullish engulfing.

If you’re still having trouble identifying them, we’ve got a solution for you!

At "Trendline", we have developed an EA system that detects over 30 different candlestick formations and patterns. It is applicable to all markets and time frames and can be easily integrated into any strategy.

Heikin-Ashi chart

Heikin-Ashi is a Forex chart used for visualizing price movements, and it closely resembles Japanese candlesticks.

The key difference lies in how the candles are calculated and displayed.

In Japanese, Heikin means average value, and Ashi means pace/speed. Therefore, Heikin-Ashi can be translated as "average price speed".

Heikin-Ashi uses averages to calculate the candles and thus presents a clearer picture of the direction and strength of the trend.

In addition, the formula includes the opening and closing values ​​from the previous period. As with Japanese candles, a bearish candle is usually shown in a darker color, while a bullish candle is in a lighter color.

Calculation formula:

• Open = ½ (Open of previous period + Close of previous period);
• High = Maximum of High, Open, or Close (whichever is higher);
• Low = Minimum of Low, Open, or Close (whichever is lower);
• Close = ¼ (Open + High + Low + Close).

The purpose of Heikin-Ashi is to clear the market noise in order to see a clearer trend. Because it takes average values ​​when calculating, Heikin-Ashi candles have smaller wicks compared to Japanese candles.

• A light candle without a downside wick signals a strong upward movement;
• A dark candle without an upside wick signals a strong downward movement.

As with Japanese candlesticks and bars, here we also have different time frames.

Renko chart

The Renko Forex chart is constructed solely based on price movement.

Instead of a combination of price and time as with most charts. The elements on the chart resemble bricks. A new brick is displayed every time the price makes a certain movement.

Each brick is placed at an angle of 45° to the previous one, regardless of whether it is bullish or bearish.

In terms of color, the scheme is generally consistent: a bullish candle is depicted in a light color, while a bearish candle is typically shown in a dark color.

Renko charts are designed to filter out minor price fluctuations, highlighting significant trend movements more clearly. Each brick represents a specific amount of price movement, such as 20 pips.

If the price moves by 20 pips, no matter the direction, the chart will display one brick.

The Renko chart is not very informative due to the lack of time dependence. For example, a long range can be visualized by a single brick.

Summary

As you now know, there are various charts available to represent price movement.

The key is to select one that you find easy to read!

At "Trendline", we use candlestick charts because they provide ample information while remaining straightforward.

It's best to keep your Forex chart uncluttered and avoid adding too many indicators that could complicate your decision-making.