3 Types of Technical Charts
The 3 Types of Technical Charts
In our third course, we will discuss about the different types of charts available on our trading
platform. Each chart type has two axes with the vertical axis showing the value of the trading
instrument and the horizontal axis indicating time.
1. Line Chart
The first one would be the line chart which is almost identical to the line that connects the value of
the trading instrument at specific instances of time. It is known as the most straightforward chart type
out of the three, but also the one that holds the least information.
2. Bar Chart
The second type of chart would be the bar chart. In this type of chart, bars are used to represent the
value of a trading instrument in a particular period of time. Thus, each bar reflects the possible values
of a trading instrument during a certain period of time. Each bar may represent the range of values
for a minute, an hour, a day, or even a month depending on what your chart is. Each bar is presented
as a single vertical line with two shorter horizontal lines connected to the vertical one. The horizontal
line below and parallel to the vertical one on the left side shows the open price of the trading
instrument for the specified period of time. On the other hand, the horizontal line on the right side of
the vertical line depicts the close price of the period. The two types of bars include the bullish bar and
the bearish bar. The bullish bar tells us that the price has gone up and the entry point is represented
by the left side horizontal line which is always below the right side horizontal line, whereas the bearish
bar is depicted by an open price (left horizontal price) that is higher than the close price (right
horizontal line).
- Green and Red Bars
Generally, a bullish bar is painted with a green colour which assists the user in establishing that it is a
bullish bar without having to know the open price and the close price of the trading instrument in the
given trading period that the bar represents.
The second type of bar is the bearish bar, with the colour red, at which the open price is always higher
than the close price for the trading period the bar represents. The bar is coloured in red, although
that is not always the case and the user can customise the colours on MT4.
3. Candlestick chart
The third form of chart is the candlestick chart which is said to be superior in appearance to the two
other forms of charts. The candlestick is made of a rectangle in the middle and two pillars, one on top
of the rectangle and the other at the base of the rectangle. Again, we have two types of candlesticks.
The bullish candlestick which is usually depicted in green, and shows that the value of the trading
instrument has risen. In this case the opening value is at the lower end of the rectangle and the closing
value at the top of the rectangle not taking into account the vertical lines mentioned earlier. The
bearish candlestick is often illustrated in red and indicates that the value of a trading instrument
declined during the period of time depicted by the candlestick. In this case the open price lies on the
top of the candleand the close price is found at the bottom, hence making the candle red (bearish).
The rectangle represents the price action between the open and the close and is called the main body
of prices. On the other hand, the vertical lines above and below the rectangle are called shadows or
wicks and represent how high or how low the price has reached within the specified timeframe.