Forex Trading Charts

Charts are an essential tool for Forex traders in their technical analysis of the market. Vantage FX clients via the MetaTrader 4 (MT4) platform will have access to some of the best enhanced charting capabilities.

The following article will explain the different charts used by traders, as featured on MT4, and how each is beneficial in their own way.

MetaTrader 4 Charts

Integrated into the MetaTrader 4 trading platform, Meta Charts combines a professional charting application with MetaTrader's popular custom indicators, scripts and automated trading capabilities. Some of the features will allow traders to:

  • Choose from 50 technical studies, including 30 technical indicators and 20 line studies
  • Create, test and automate your own technical studies and indicators using Meta Quotes Language 4
  • Choose from 9 time intervals, from 1 minute to monthly
  • Place trades and view open positions directly from the charts
  • View an unlimited number of charts at once
  • Integrate your chart analysis with MetaTrader 4's auto-execution technologies: choose from Instant Execution, Request Execution, Market Execution

 

Line Chart

The simplest of trading charts is the line chart. Normally, the line chart is formed from connecting the series of closing prices. The curved line overlaid on top of this MT4 line chart is the moving average line chart which as the name suggests map out the averages of price movements smoothing out the outliers and fluctuations.

Generally, these charts are used for very short term intervals (ideally for 5 minute intervals – maximum 30 minute intervals).

MetaTrader 4 Line Chart - Vantage FX

 

Bar Chart

A Bar Chart is a type of chart that attempts to display a visual representation of price activity over a given period of time. This type of chart is popular among Forex traders because it enables quick recognition of trends and patterns. These charts are also commonly referred to as ‘OHLC’ charts standing for Open, High, Low, Close, which will soon become apparent.

For each trading period on the chart, a vertical line is constructed, the length of which is determined by the highest and lowest price that the currency traded for the period. The opening price is denoted by a small horizontal line on the left of the vertical bar, and the closing price, by a similar line on the right side.

Generally these charts are used for intervals of up to 24 hours. Different colours can be used to identify bars that close higher than the open (bull or up bars) or lower than the open (bear or down bars). The example below from MT4 has white lines for up bars and red bars for down bars.

Generally, these charts are used for very short term intervals (ideally for 5 minute intervals – maximum 30 minute intervals).

MetaTrader 4 Bar Chart - Vantage FX metatrader bar chart 2

 

Candlestick Chart

Similar to the Bar Chart, the Candlestick Chart also displays the high, low, open, and close over a specified period of time. The candlestick chart adds dimension and color to the bar chart by depicting the range of the bar between the open and close as a rectangular body. The candlestick chart aims to communicate a quick and easy way to ascertain the general pulse of the market.

This rectangular body, also referred to as the real body, represent the difference between the open and close prices. An up-candlestick occurs when the close price is higher than the open – and down-candlesticks occur when the close price is lower than the high.

In the example MT4 Candlestick chart below, up-candlesticks are filled in white whilst down candlesticks are red-outlined black rectangles. If the open is equal to the close there will not be a body, just a line – this type of candle is referred to as a "doji".

The thinner lines extending beyond the body are called "shadows". Above the body is the high (highest price) and below the body is the low (lowest price) that was reached for the selected time period. Shadows do not necessarily need to be present.

By looking at the length of the real body, you can tell how aggressive the changes in price movements have been for that time period. The longer the body - the more aggressive the movement.

Candlestick charts are generally used on longer term views (daily, weekly or monthly data). Shorter time frames are not generally recommended with candlesticks.

MetaTrader 4 Candlestick Chart - Vantage FX  metatrader candlestick chart 2

The next section of the guide will show you the most basic level of technical trade analysis – identifying trends.