There are different types of charts used in forex trading and each have their own advantages and disadvantages. The majority of retail forex traders will be familiar with bar charts, line graphs and candlesticks. In addition to these commonly used charts, there are also renko charts which I find can help to filter out some of the noise from other chart types.
Forex Line Charts
These are the most basic charts you can use that some traders prefer due to their simplicity. They represent only the closing prices over a set period of time. The line is formed by connecting the closing prices over the time frame. However, it is lacking in showing the visual information of the trading range, such as the high, low, and opening.
Forex Bar Charts
A forex bar chart consists of a series of vertical lines, each representing the price range during a specified time frame. Each vertical line has a small horizontal line connecting on its left, indicating the opening price for that time period, and a small horizontal line connecting on its right, indicating the closing price for that time period.
Forex Candlestick Charts
Forex candlestick charts are similar to bar charts although they plot a series of thick vertical lines (“candles”), colored to indicate a lower or higher close compared to the previous candle, representing the price range, high price, and low price for the time frame it represents.
Candlestick charts can be great for conducting price action analysis and finding candlestick patterns such as doji’s, marubozu, three black crows, inside bars, engulfing bars, evening star, hammers and spinning tops.
It can be very useful to learn candlestick patterns as they show what the market is doing at any given moment. I have reviewed candlestick courses which you can see in my forex trading course reviews.
Forex Renko Charts
A renko chart is a type of financial chart of Japanese origin used in technical analysis that measures and plots price changes. A renko chart consists of bricks, which I personally feel can clearly show market trends and increase the signal-to-noise ratio compared to typical candlestick charts.
The only issue with renko charts is that they are not readily available in most online trading platforms so they will require some additional software to be displayed. I have reviewed renko software in the past such as the Renko Charting Package, Renko Street Trading System and Renko Enhanced. Whilst it does take some time to setup renko charts, I think it is certainly worth doing.
Forex Chart Time Frames
These chart types can be displayed in online trading platforms on multiple time frames, usually from 1 minute up to 1 week. With the exception of renko charts which do not follow time but rather price movements.
In the MetaTrader platform, the chart time frames are M1 (1 minute), M5 (5 minute), M15 (15 minute), M30 (30 minute), H1 (Hourly), H4 (4 Hour), D1 (Daily), W1 (Weekly), and MN (Monthly). The 5-minute chart means each plot shows the price range that occurred during 5 minutes of trading.
You can adjust the time frame to display the data that you need for your trading strategy. Those with scalping strategies are likely to trade on lower time frame charts whereas day traders and swing traders would probably use the 1-hour charts and above.
I personally find that my trading signals can be more reliable on the long-term time frames whilst this also means that I do not need to constantly sit and stare at the charts. Of course, you should always trade with a strategy and time frame that you feel most comfortable with as every trader is different.
Forex Chart Types Summary
Hopefully you now have an understanding on the different type of charts available when trading forex online. The type of chart that you choose will most likely depend on your trading strategy. If it involves price action trading then candlesticks may be useful whereas a trend trading strategy could be easier to follow on renko charts.
In order to access these charts, you will need a trading account with a forex broker and an online trading platform. If you are looking for a broker then please feel free to check out my best forex brokers page. You could practice on a demo trading account to see which forex chart type you prefer.