Line Chart And Candlestick Chart In Technical Analysis

The currency charts are used by the technical traders in the Forex market. This is even used by the fundamental traders because the technical charts let then spot the entry and the exit prices and lets them monitor their position activity.

Thus, the price charts are good to know because it gives you clear points on where to enter and exit a position and where to keep the stop loss. However, not every chart will look the same. Thecommoncharts that are used by the analysts are the line chart and the candlestick charts.

To know which chart you should be using it is first important to understand the difference between the two.

Line chart

The line chart is the most basic of the technical analysis charts. See this page on how the line charts are drawn. The chart plots the time on the X-axis and the price on the Y-axis. The line charts give you the basic representation of the price history. It is important to understand in the Forex market that suppose you are trading AUD/USD then when the line chart is rising then this means that the AUD is gaining against the USD. Similarly, when it is declining then the USD is gaining against the AUD.

If you just want to get a quick view to know where the rates are heading to then the line chart can be used because it is quick and without any frills. Thelinecharthowever just uses the closing price of the period and does not give you any other information. If you want to know what happened to the price in the interval then you will need a more detailed chart which is the candlestick chart.

Candlestick Chart

The candlestick chart is the most popular chart that is used by Forex traders. This gives you a detail of the price and what the price has done in the interval. The line chart plots just the closing price but the candlestick charts plot the open, the close, the high and the low price in a particular time interval.

The candlestick charts also use different color codes for the bearish and the bullish candle which lets you get a better visual feel of what the market is doing.

The time interval is represented by a single candle and its upper and lower wick. The upper wick gives you the high price of the period and the lower wick gives the low price of the time period.