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Deciphering Bars and Candlesticks on Trading Charts

18 Oct 2023

A forex chart is a type of window that allows us to see what is going on in the currency market. It is often shown as a graph, with the price on the right side and the time on the bottom. It's a graph of price vs time if you will. However, how the prices on the graph are portrayed has a significant impact on how we understand the currency market. These forms of presentation strategies are referred to as chart types.

  • The Candlestick Chart

In comparison to the line chart, the Japanese candlestick chart provides more information. Each candle indicates four things: the opening and closing prices of a certain period, as well as the highest and lowest price levels within that time frame.

The open and close prices are represented by the body of a candle, while the high and low prices are represented by the wicks. Aside from those four pieces of data, the candlestick employs colours to indicate whether the price has closed above or below its initial level. Before the usage of colourful prints for producing charts, we only had black and white options.

As a result, the bullish candlestick was presented in white, indicating that the price closed above the starting price. The bearish candlestick was drawn in black, indicating that the price had closed below the starting price. However, we now have the option of altering the colours to whatever we like. Green for bullish candles and red for bearish candles are the most prevalent hues.

  • The Bar Chart

Since the data they depict is almost identical, the bar chart and the candlestick chart are highly similar. They both show prices that are open, closed, high, and low. However, there are some minor changes.

The appearance of the bar chart is the most noticeable variation. Vertical lines with small horizontal lines projecting from each side makeup bar charts. The initial price is represented by the line on the left, while the closing price is represented by the line on the right.

Bar vs Candlestick Charts

The distinctions between bar and candlestick charts are small, and in some cases non-existent.

The bar chart emphasises the closing price of the preceding period above the actual opening price of a given period when assessing the opening price of a particular period. On the other hand, the candlestick chart utilises the actual opening price of a certain period. Because the starting price of one period is usually the same as the closing price of the preceding one, the change is minimal.

Candlestick charts are the source of more online Forex trading patterns than bar charts. Of course, bar charts may be used to depict patterns. Candlestick charts, on the other hand, are favoured since the patterns were created expressly for them.

When creating trend lines and zones on the chart, the bar chart may give you a little more accuracy. Because bar charts are really simple lines, this is the case. Candlesticks, on the other hand, have larger bodies that take up more space and make accuracy more difficult. Even though the difference may be insignificant, some skilled traders believe it has aided them in making better online trading judgments.

Wrapping Up

Even though they both display identical open-close-high-low data, the candlestick chart is by far the more popular. The reason for this is that the candlestick is the source of many trading tools, formations, and methods. Another reason for the popularity of the candlestick chart is that the colours make it simple to identify whether the price is moving in a bullish or bearish direction at a glance.

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