How to read forex charts

Before charts became the norm, traders only looked at the 'tape'
or raw price movements to analyse the markets. This is called
'reading the tape'.

But with the advent of charts, most traders utilise them for an
easy and graphical interpretation of market movements. Charts
can also show patterns, trends and other visual signals that can
help traders identify trading opportunities.

In this article, we’ll discuss the three most commonly used forex
chart types used by technical analysts and traders, while also
highlighting some of their advantages and disadvantages. By the
end of this article, you will know how to read forex charts and be
able to identify which chart types work (or don’t work) for you.

Before that, let's deep dive into exactly what the different types of
trading charts are.

Table of contents
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 What is a price chart?
A price chart is a visual representation of a particular instrument's
price over a set period of time – this could be a currency pair in
forex trading, stock indices, precious metals or any other financial
assets.

Price charts are one of the most important tools for beginner
traders to learn. They must understand how they work in order to
conduct a technical analysis of the market they are looking to
trade in. The chart visualises a set period of time where trading
activity is happening on the asset – anywhere between one
minute to a day or a full week.

The charts have an x-axis (horizontal axis) representing the time

scale, while the y-axis (vertical axis) represents the price scale.
By incorporating technical indicators and analysing the chart from
left to right (where the most recent price change is shown on the
right side of the chart) traders can identify patterns and make an
assessment on the probability that the asset will increase or
decrease.

What is a forex chart?

A forex chart shows the changing price of selected currency pairs
over time. Exactly like other price charts, the x-axis shows the
time while the y-axis represents the price.

The below image is an example of a forex chart using the

EUD/USD currency pair.
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 How do chart timeframes work?
The chart timeframe can be selected to showcase the trading
data on the financial instrument you are analysing – for example a
specific currency pair.

The trading platform you are using will likely have a default
timeframe of one day but you can change it to reflect whatever
amount of time you would like, from as low as one minute to as
long as one month.

For example, if you were to change the timeframe to one hour,

each point on the chart would now represent an hour’s worth of
trading data, whether it be on a bar, line or candlestick chart.

How to access live price charts?

Once you understand what a price chart visually represents, you
need to know where you can find this essential tool. These charts
showcase buying and selling trading activity happening in the
market in real-time for whatever financial instrument you want to
view.

To be able to access live forex charts you will need to log in to the
MetaTrader 4 trading platform. To do so, either sign up for a live
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 trading account or a demo trading account to experience a replica
trading environment showing the same data in real time.

Different types of forex trading charts

There are many different types of charts used in forex analysis
and any type of technical analysis related to a financial asset.
Depending on the trading style or type of analysis, one chart may
serve you better than another.

The three most popular types of forex charts are:

1. Line charts
2. Bar charts
3. Candlestick charts

Line chart

Line charts are the easiest chart type to read. They show you the
close price for a given time period, typically represented by a
continuous curved line that connects dots that represent the
changes in price over certain intervals of time.

Line charts give a clear, simplified view of the current market

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 situation and they work best for people who want a quick glimpse
of where the market is heading. This type of chart is ideal for new
traders who require simplicity and clarity, and it also teaches
them basic chart reading skills which they can later develop to
more advanced levels using candlestick charts.

To closely monitor their trading strategies, experienced traders

usually require more information than a standalone line chart
offers. Unlike the candlestick chart, which displays the daily open,
close, high and low prices of the asset, the line chart only offers
the closing price point, where a lot of strategies will require more
data than that.

Pros Cons

Does not show gaps

Simplicity
An example will be the price gap
Easy to understand even for
between Friday’s closing price &
beginners
Monday’s opening price
Good for graphic analysis Does not give full information

Straightforward depiction of In comparison to the other charts,

support and resistance levels does not show other details
and easy-to-determine concerning what happens during
patterns the day

Bar chart
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 Bar charts (also known as OHLC charts) are an upgraded version
of the line chart, offering information on the 'Open', 'High Low'
and 'Close' prices - hence the abbreviation.

They are typically represented by a vertical line with two

horizontal lines to the left and right. The two horizontal lines
depict the open price and closing price, while the top and bottom
of the vertical line indicate the highest price and lowest price
reached during the given time frame. Bar charts can be used to
represent any period of time, ranging from as little as a few
seconds to a week or more.

Due to each bar representing a period of time, different

timeframes will be useful for investors with various strategies and
goals. A long-term investor may find it more beneficial to use a
week timeframe, while day traders will utilise a much shorter time
frame like 30 seconds, one minute or five minutes.
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 Pros Cons
Range dominates visuals
Comprehensive
The open/close level of each
Gives an excellent view of the Open,
bar is harder to notice when
High, Low, and Close of the price
the chart is full of bars
Provides insights into trends and
patterns

Able to observe the contraction and

expansion of price ranges during
trends, over a given range of time

Candlestick chart
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 The candlestick chart is one of the most popular chart types used
by traders. The origin of candlestick charts (sometimes referred
to as Japanese candlesticks) dates back to 18th-century
Japanese rice traders, who came up with this chart for the
purpose of analysing the rice markets.

Candlesticks are made up of two separate parts known as the

body and the shadows. The top and bottom of the body tell us the
opening and closing prices during the given time period. The top
and bottom of the shadows tell us the highest and lowest prices
reached during the given time period.
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 The top and bottom of the candlestick body reflect the opening
and closing prices in the given time period.

Typically, if the closing price is lower than the opening price, the
candle body will be red or black. If the closing price is higher than
the opening price, the body will be green or white.

In this case, black candlesticks tell us that the price is declining,

while white candlesticks tell us that the price is increasing.

While red and green or black and white are the most common
colours to depict price movements up and down, these colours
can be easily customised.

Pros Cons

Overwhelming
Comprehensive
Might seem like an
Similar to bar charts, it gives an excellent view
information overload
of the Open, High, Low, and Close of the price
to a beginner trader
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 Able to identify trends and connect
psychology with the price pattern

There is a full reference below of 1 bar to 4 par

battens which helps traders make judgements
on the future direction of price

Mountain chart

A mountain chart is very similar to a line chart, where it still

follows the close price but underneath the line, the area is shaded
(the shadow of the line gives the appearance of a mountain.

What is the best chart for forex?

The most commonly used forex chart is the candlestick chart.
Every trader has their own preference but candlestick analysis
can provide a clear read on the current sentiment of the market.

Why are candlesticks so useful?

Compared to line and bar charts, candlesticks capture the most
information and depict the broadest picture of price changes over
a fixed time frame.

You can tell the emotions behind price movements e.g. long
“wicks” can reveal strong support and resistance levels if
observed on longer periods and can show violent movements
within a single day.

Check out our article on how to read candlestick charts and learn
how to master the art of reading them.

What are support and resistance levels?

Support and resistance levels are areas where the price of a
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 currency pair is likely to reverse or stage a breakout.

A support level is a level where the downward price trend of a

currency pair pauses as buying demand increases, so the trend
reverses and turns upward. The same reasoning applies to
resistance levels where the upward price momentum of a
currency pair weakens and the price is likely to reverse and head
downward. Support and resistance levels can provide excellent
opportunities for traders to open new trades.

What are the benefits of using charts?

Familiarising yourself with different chart types can enhance your
trading as they deliver many benefits, including:

Visual illustration of price movement can help identify important

trends and patterns.
Helping you spot entry and exit levels that may not be obvious
without a chart.
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 Market sentiment and trader psychology – represented in
extreme price movements –are captured in chart patterns.
The ability to be used in conjunction with fundamental analysis to
confirm trade entry and exit levels.
Use of historical data to provide a perspective of price movement
over different time frames.

What are the main forex timeframes for

charts?
Many different timeframes are used by traders depending on their
forex trading strategy, though in the forex market timeframes can
be split into three common options: long-term, medium-term and
short-term. It’s up to the trader to pick the best timeframe for
what they are trying to achieve.

Some traders like to utilise a technique called multiple time frame

analysis: rather than selecting just one timeframe, they will view
the currency pair under different time frames. Generally, the
trader will use a longer timeframe to identify a longer-term trend,
while a shorter timeframe is used to find a better entry into the
instrument.

Refer to the table below to see the different trading styles and
how they match up with the best-suited timeframes on forex
trading charts.

Chart Day Trading Swing Trading Position Trading

Trend Chart 30m - 4h Daily Weekly

Trigger Chart 5m - 60m 2h - 4h Daily

Now that we’ve explored the three main types of charting, you
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 should be able to identify which ones suit your type of analysis
the best.

While they all serve the same function – i.e. to indicate where a
price has been and currently is – there are pros and cons in each
that could drastically impact the way you make your trading
decisions.

Ready to trade your edge?

Join thousands of traders and trade CFDs on forex, shares,

indices, commodities, and cryptocurrencies!

This information is not to be construed as a recommendation; or

an offer to buy or sell; or the solicitation of an offer to buy or sell
any security, financial product, or instrument; or to participate in
any trading strategy. It has been prepared without taking your
objectives, financial situation, or needs into account. Any
references to past performance and forecasts are not reliable
indicators of future results. Axi makes no representation and
assumes no liability regarding the accuracy and completeness of
the content in this publication. Readers should seek their own
advice.

Milan Cutkovic
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 Milan Cutkovic has over eight years of experience in trading and
market analysis across forex, indices, commodities, and stocks.
He was one of the first traders accepted into the Axi Select
programme which identifies highly talented traders and assists
them with professional development.

As well as being a trader, Milan writes daily analysis for the Axi
community, using his extensive knowledge of financial markets to
provide unique insights and commentary. He is passionate about
helping others become more successful in their trading and
shares his skills by contributing to comprehensive trading eBooks
and regularly publishing educational articles on the Axi blog, His
work is frequently quoted in leading international newspapers and
media portals.
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 Milan is frequently quoted and mentioned in many financial
publications, including Yahoo Finance, Business Insider, Barrons,
CNN, Reuters, New York Post, and MarketWatch.

Find him on: LinkedIn

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