Chart Types — Reading the Market's Story 📊

Every point on a forex chart represents four essential pieces of data for that period: OHLC.

The Four Data Points

Open (O): The price when the period began

High (H): The highest price reached during that period

Low (L): The lowest price reached during that period

Close (C): The price when the period ended

Why OHLC Matters

All four points: Full information for precise analysis (Candlestick, Bar)

Only Close: Simplified trend view (Line)

High/Low wicks: Show rejection and liquidity hunts

Open/Close body: Shows who won the battle (buyers or sellers)

The Candlestick chart is the format of choice for virtually all professional forex traders. It provides the richest visual story of price action.

Anatomy of a Candlestick

A candlestick has two main parts: the body and the wicks (shadows).

The Body (Battle Result)

Green/Blue/White Body (Bullish):

• Close price was higher than Open price
• Buyers (bulls) dominated the period
• Bottom of body: Open price
• Top of body: Close price

Red/Black Body (Bearish):

• Close price was lower than Open price
• Sellers (bears) dominated the period
• Top of body: Open price
• Bottom of body: Close price

Body Size Reveals Conviction:

• Large body: Strong conviction, decisive winner
• Small body: Weak conviction, nearly equal battle
• No body (Doji): Perfect balance, indecision

The Wicks/Shadows (Rejected Extremes)

Upper Wick (Upper Shadow):

• Shows how high buyers pushed price
• Length reveals strength of rejection by sellers
• Long upper wick = sellers rejected higher prices

Lower Wick (Lower Shadow):

• Shows how low sellers pushed price
• Length reveals strength of rejection by buyers
• Long lower wick = buyers rejected lower prices

Wick Analysis:

• Long wicks: Show strong rejection (institutional orders)
• No wicks: Show conviction (one-sided dominance)
• Wicks at key levels: Reveal liquidity hunts

Why Candlesticks Dominate

At a Glance, You See:

1. Who won the period (color/direction of body)
2. How decisively they won (size of body)
3. Whether extremes were rejected (length of wicks)
4. Market psychology (conviction vs. indecision)

The Bar Chart

The Bar chart displays the same OHLC data as candlesticks, but less visually impactful.

The Vertical Line:

• Bottom: Low price
• Top: High price

Left Horizontal Tick: Represents the Open price

Right Horizontal Tick: Represents the Close price

Bullish Bar: Right tick (Close) is higher than left tick (Open)

Bearish Bar: Right tick (Close) is lower than left tick (Open)

Why Less Common:

• Takes longer to determine if bullish or bearish
• No color coding for instant recognition
• Harder to spot patterns quickly

Professional Verdict: Bar charts are functional but inefficient compared to candlesticks.

The Line Chart

The Line chart is the most basic chart type, showing only the Closing Price of each period.

What You See:

• Single continuous line
• Only closing prices
• Smooth, flowing representation

What You Don't See:

• Intraday volatility
• High and Low extremes
• Wicks and rejection
• True range of movement

When to Use a Line Chart

Visualizing Macro Trends:

• Clean trendlines (no confusing wicks)
• Obvious Higher Highs / Higher Lows
• Clear trend direction
• Psychological levels stand out

Identifying Key Support and Resistance:

• Closing price = final settled sentiment
• Removes noise from intraday wicks
• Shows where market truly "accepted" price

Critical Caution: Never use a Line chart for trade execution.

Why?

• You can't see the High and Low
• Can't calculate safe Stop Loss placement
• Can't determine true pip risk
• Can't identify wick rejections

Professional Rule: Use Line charts for macro analysis only. Always switch to Candlesticks for execution.

A professional trader uses each chart type strategically.

The Professional Chart Selection Matrix

The Professional Trading Workflow

Step 1: Macro Analysis (Line Chart)

• Timeframe: Daily or H4
• Purpose: Identify overall trend
• Actions: Draw major trendlines, Mark key S&R levels, Establish directional bias

Step 2: Structure Analysis (Candlestick Chart)

• Timeframe: H4 or H1
• Purpose: Identify entry zones
• Actions: Find Order Blocks, Mark Supply/Demand Zones, Identify Fibonacci levels

Step 3: Execution (Candlestick Chart)

• Timeframe: H1 or M15
• Purpose: Time precise entry
• Actions: Wait for reversal candle, Measure wick for SL, Calculate pip risk, Execute trade

Why This Workflow Works

Line Chart First:

• Removes noise and confusion
• Makes trend crystal clear
• Identifies key levels cleanly

Candlestick Chart Second:

• Reveals detailed price action
• Shows institutional footprints (wicks)
• Enables precise SL/TP placement

Result: Clear macro direction + precise micro execution = high-probability trades.

The three primary chart types are Candlestick, Line, and Bar:

Professional Approach: Use Line charts for big-picture trend analysis on Daily/H4. Use Candlestick charts for detailed price action and execution on H4/H1/M15.

Q1: Can I trade successfully using only a Line chart?

No. While the Line chart is excellent for macro trend identification, it lacks the High and Low prices needed to set a structurally safe Stop Loss. Use Line for analysis, Candlestick for execution.

Q2: Why is the closing price considered so important?

The closing price reflects the final, settled sentiment of the market for that period. Institutional traders pay close attention to where the market closes relative to the Open. A close far from the open shows strong conviction.

Q3: Should I change the color of my candlesticks?

Stick to standard convention: Green/Blue/White for bullish and Red/Black for bearish. Consistent color coding helps your brain process information instantly.