We will dedicate this lesson to the different types of trading charts. In fact, trading platforms for placing buy or sell orders also contain live charts where you can see the quotes.
We can display the graph of the desired tool, either from the time of quotation or from previous periods. You can test the charts of IQ Option’s demo platform by clicking here.
In this article we will analyze the main elements and the types of charts commonly used in the Forex market.
In general, the chart is composed:
- By an abscissa, the horizontal axis, which represents the time span in which a specific event or condition takes place;
- By an ordinate, the vertical axis, which usually represents the price of the financial activity.
In addition, there is another fundamental element, which can be modified by the trader. This is the time frame, i.e. the reference time.
Usually, charts are automatically set to a 5-minute time frame, but they can also be modified: 1 minute (1m), 15 minutes (15m), 1 hour (1H), 24 hours (24H), etc.
The feature of the IQ Option platform is that it also offers the possibility of displaying very small timeframes (or temporalities) such as 5, 10, 15 and 30 seconds. Try it for free here.
Other main elements to be aware of are:
- O (Open), which represents the opening quote
- C (Close) represents the closing price
- H (High/Maximum), which represents the highest peak
- L (Low/Minimum) represents the lowest point
Finally, don’t forget to keep the time zone under control, i.e. consider the time according to the country you are in.
Types of Trading Charts
Basically, there are three types of charts, which are used to represent currency trends in the Forex market:
- Bar charts
- Line charts
- Candlestick charts.
The bar chart allows you to identify both the opening and closing price of currencies for the specific period. In addition, it is capable of detecting the bottom and top point.
These values can also indicate the downward and upward peaks of a security during the day, being critical elements, they will then be used to track supports and resistances.
Linear or line charts
The second, the line graph is used instead in different sectors, and allows the visualization of the history of currency prices and therefore allows the study of variations over a long period.
Compared to the others, it is a simple chart, which reproduces the price trend over a predefined period of time.
Finally, the last one, the candlestick chart which allows you to know the opening and closing prices, and the minimum and maximum value of currencies.
This type of graph is very simple to interpret, it can be understood as the fusion between the precision of the bar graph and the simple line of the line graph.
Live Trading Charts
Below you can see an example of a live CFD chart. These CFDs are offered by IQ Option and therefore the chart below refers to the live price and past quotes of CFDs offered by IQ Option, one of the largest CFD brokers in the world.
This chart is interactive, which means that you can interact with it. For example, you can change the periods or time frame of the chart, in minutes, hours, etc.
You can also change the display in lines or candlesticks and more.
This is the capture of a chart as an example to introduce you to the topic of live quotes. To see the quotes for this trading platform, you can download it for free here. You can then easily access live CFD charts by choosing from thousands of stocks.
We have said that you can customize the chart on the platform, but there are additional options such as the possibility of applying indicators.
Indicators are advanced tools for identifying the best times to open an order.
In our CFD course we will present all the indicators and learn how they can provide us with trading signals, i.e. when to buy or sell.
Analysis Of Trading Charts
One of the most popular and reliable patterns in technical analysis is the head and shoulder pattern.
More specifically, it is a reversal pattern that, once formed, indicates that the current trend will be reversed. There are two versions of the head and shoulders pattern:
- Head and Shoulders Top : This pattern is usually at the peak of an uptrend and indicates that the price of an asset is destined to fall once the pattern is complete.
- Head and Shoulders Bottom (or Inverse Head and Shoulders) : This pattern usually forms during a downtrend and indicates that an asset’s price is destined to rise.
Both patterns have a similar graphic representation, as they contain four main elements: two shoulders, a head and a neck or cleavage.
This type of pattern occurs when the neckline breaks (support and resistance), giving rise to a second shoulder.
The heads and shoulders are formed by the peaks and valleys on the chart.
There are several other formations that traders can take into account in their analysis, such as the double top/bottom, triple top/bottom etc.
Technical Analysis In Trading Charts
As you become more familiar with reading and reviewing the charts, you will learn to add other tools.
These technical indicators can help clarify some key information for stock or currency trading, such as whether an asset is “oversold” or “overbought”.
In the image below you can see where to find the indicators in the IQ Option platform.
In practice, technical indicators integrated into real-time charts, such as volume indicators, trend lines, Fibonacci levels, stochastic oscillators and many others, can block market noise, providing a clearer picture of the markets and future trends.
If you want to use IQ Option‘s indicators, you can do it for free by opening a demo here.
MetaTrader 4 Charts
In addition to the IQ Option trading platform, which is easy and practical to use even for beginners, we also find the MetaTrader 4 platform for the more experienced.
To take advantage of this platform requires further study and practice to get the most out of it.
That’s why you can find a free course on MetaTrader4 on our website.
The following screenshot is the initial screen of MetaTrader 4.
As you can see, this is a more complicated platform compared to the IQ Option platform. You can get MetaTrader 4 by registering with one of the top brokers like XM.com from here, either in demo or live mode.
Of course, we recommend that you start with a free demo, especially if you don’t have any experience until you gain confidence with this instrument.
Therefore, if you are among the beginners, we recommend the IQ Option platform. For the more experienced, we recommend both platforms.
For example, you can use Metatrader4 for analysis and IQ Option for opening positions. You are free to decide based on your own trading style.