Today we will discuss the various types of charts and how to identify. Each chart type comprises two axes, with the vertical axis indicating the value of the trading instrument and the horizontal axis representing time. On our trading platform, there are three chart types.
1. Line chart: this consists of a simple line connecting the trading instrument’s value at specific time points. It’s the simplest of the three chart types, but provides the least amount of information.
2. Bar chart: In this chart, bars illustrate the trading instrument’s value over a defined time period. Each bar represents the range of values for the instrument during that period. Each bar may represent the range of values for a minute, an hour, a day or even a month, depending on your chosen timeframe. Each bar consists of a vertical line and two horizontal smaller lines connected to the vertical one. The left horizontal line represents the opening value of the instrument for the given time period. The horizontal line on the right side of the vertical line represents the closing price. These bars are usually coloured. There are two types of bars: the bullish bar and the bearish bar.
The bullish bar indicates that the price has increased and its entry point, with the left side horizontal line always lower than the right horizontal line. Typically, a bullish bar is displayed in green, making it easy to identify as such, without the need to check the specific entry and exit prices for the trading instrument during the period represented by the bar.
The second bar is the bearish bar, at which the entry value is always greater than the exit value for the trading period represented by the bar. This indicates a decline in the trading instrument’s value and is usually coloured in red, though the user can customise the colours in the MT4 platform.
3. Candlestick chart: The candlestick chart is known for its visual clarity. The candlestick consists of a rectangle in the middle and two vertical lines, one on the top of the rectangle and one on the bottom of the rectangle. Again, there are two distinct types of candlesticks.
The bullish candlestick, usually shown in green, signals an upward movement in the value of the trading instrument. In this case, the opening value is at the lower end of the rectangle while the closing value is at the top of the rectangle, excluding the vertical lines mentioned previously.
The bearish candlestick, usually shown in red, shows a decline in the value of a trading instrument during the represented time period. In this case, the top of the rectangle represents the opening price and the bottom represents the closing price. In a bearish candlestick, the value of the trading instrument has decreased.
In summary, the rectangle represents the price action between the open and the close and is referred to as the main body of prices. The vertical lines above and below the rectangle represent valid prices, yet they differ from the open or close prices and are called shadows.
