Trading with Charts
Forex and cryptocurrency chart patterns frequently indicate signal transitions between trends and tell if it is rising or falling. Using a series of trendlines, curves, or both, one could identify a price pattern, which is an identifiable configuration of price movement.
Those new to pattern trading may find it a bit overwhelming. There are so many price action chart patterns and uses of technical analysis and charting that it is easy to confuse an amateur. Make things simple by reducing the choices to three of the most successful chart patterns: line, bar, and candlestick.
Types of Trading Charts
What is the best chart for day trading? Price charts bring to life the trading activity during any single trading period. These periods could go on for several minutes, or even up to twenty-four hours and beyond; but the sessions cover many data points, including the opening, high, low, and/or closing prices. Traders may use one or more of three main types of trading charts: line, bar, and candlestick.
The line chart is possibly the most comprehensible price chart. It draws a single line connecting the forex or cryptocurrency pair’s closing prices over a specified time.
The chart is easy to understand but may not give insight into that day’s activity. However, it will make it easier for traders to spot trends and visually contrast closing prices across different periods.
Brokers tend to base valuations on the closing price. This method can be valuable when comparing a forex or cryptocurrency pair’s trend or overall performance to the market.
One of the advantages of bar charts is that they help traders see the price range of each period. From one bar to the next or over a range of bars, bars may vary in size. Notice how the bars change size between times of high and low volatility. As the market becomes more volatile, the bars will get bigger, and the price swings will be more extreme. The price usually shrinks to smaller bars as the market calms.
The price bar also displays the opening and closing prices for the specified time together with two horizontal lines. The left line signifies the open, and the right line shows the close.
The last variation of the bar chart is the candlestick. A daily candlestick displays the market’s open, high/low, and close prices for the day. It is no different from a bar chart, though the “real body” of the candlestick is the candlestick’s broadest portion. The real body portion represents the price range between the opening and closing of the day’s trade. If the close was lower than the open, the real body should be colored in. However, if the close price is higher than the open, the real body will be blank.
For the purposes of forex and or cryptocurrency trading, candlestick charts are considered to be the most readily available.
Tips for Choosing a Forex or Cryptocurrency Chart
Traders have a wide range of price charts at their disposal to navigate the markets, not to mention countless combinations of indicators and trading strategies available. It may help answer questions like “how to read a 5-minute candlestick” or “what are the best days to trade?”
Consider the characteristics and merits of each type of chart before you decide on a particular chart. Do not confuse yourself with too much information and make a rash decision. Keep it straight forward. Start with the basics and move forward confidently with patterns or forex or cryptocurrency pair charts you understand.