ChartsHow Do We Analyze The Candlesticks?
Charts are the main way to read the Forex market and other stock markets.
The chart is the instrument that focuses on technical analysis as it allows a precise study of current and historical price movements, predicting future market trends.
The 3 main types of charts for Forex are the Line Chart, the Bar Chart and the Candlestick Charts.
The most used is the candlestickchart since it is more graphically intuitive with all necessary price information.
Each vertical bar that forms the graph represents the chosen period: if we selected M1 timeframes for each of the present candles, it represents 1 minute, if we chose M30 timeframes, each of the present candles represents 30 minutes, and so on.
For example, an M1 chart that has 100 candles adds up that we are analyzing 1 hour and 40 minutes of price movement.
Each single candle manages to provide the following information:
- Opening prices.
- Closing price.
- Maximum price reached (High).
- Minimum price achieved (Low).
Each candle is made up of a body and two shadows. The body can tell us the opening and closing price of the candle, while the shadows indicate the minimum (Lowest price) and maximum (Highest price) value reached during the period represented by the candle.
For the graph to beintuitive, colors are also used. Usually the color of the candle is green when ascendingi.e. closing price is greater than the opening price; while the descending candle is redi.e. closing price is less than the opening price.
Although the Candlestick chart is the most popular and user friendly chart, mainly because of its popularity with price action using Japanese candle sticks, some other strategy may require the use of Line charts. Line charts simply represent a connection of the closing prices (bid), on MetaTrader platform.
Some Elliot Wave enthusiasts suggest carrying out the wave count using the Line chart, thereby reducing the level of subjectivity with the high and Low price information.
Also, in order to view some other attached indicator without the candlestick or the bar charts getting in the way, a trader may switch to the line chart and change tis setting on the MetaTrader platform. The properties window can be launched by pressing the F8 Function key on the keyboard. This will enable editing of the candlestick and line settings on the MetaTrader platform.