Welcome, dear reader! If you are reading this, then you are probably interested in trading. Welcome to the exciting world of trading! Here, we will take a closer look at trading charts and we will teach you how to use them to unlock potential profits. Whether you’re a newbie or an experienced trader, this blog post will help you understand trading charts.
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What are Trading Charts
Trading charts are visual representations of financial market data that help traders identify patterns, trends, and open trading account with other key information. If you’re new to trading, a trading chart can look like an alien language, but they are actually easier to understand than you might think. There are different types of trading charts available, but the most common ones are candlestick charts, line charts, and bar charts.
Types of Trading Charts
Candlestick charts are the most popular among traders, especially those in the Forex market. Each “candlestick” represents a specific time period, usually ranging from 1 minute to a month, depending on the trader’s preference.
The “real body,” or vertically elongated rectangular shape, on a candlestick chart stands in for the opening and closing price. The top and bottom lines, referred to as the “shadows,” indicate, respectively, the highest and lowest price levels during the given time frame. If the closing price is higher or lower than the opening price, it will show up as a different color on the candlestick body. If the body is green or white, the closing price was greater than the opening price, and if it is red or black, the converse is true.
The formation of different candlesticks can indicate a trend reversal, a continuation of an existing trend, or a potential market trend. For example, a “bullish engulfing” pattern occurs when a white candlestick “engulfs” the previous red candlestick’s body, indicating a potential bullish trend. In contrast, a “bearish engulfing” pattern occurs when a black candlestick “engulfs” the previous white candlestick’s body, indicating a potential bearish trend.
Line Charts
Line charts are the simplest type of trading chart, consisting of a simple line that connects the closing prices. With this chart, only the closing price is taken into account, so it’s best used for identifying long-term trends.
Bar Charts
The bar chart shows the opening and closing prices, as well as the high and low prices for a specific time period. The vertical line represents the high and low prices of the market movement during this time period. The horizontal line at the left side represents the opening price and the horizontal line at the right side indicates the closing price.
Bar charts are perfect for analyzing short-term market trends and price volatility, but they can also be used for long-term market analysis.
