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The bar chart, is slightly more complex than the line chart. At any one given time, there are 4 key components of price that can be analysed.

The bar chart is also commonly referred to as the OHLC chart, derived from the 4 key components that it consists of;

Open – The price at which the market opens at.
High – The highest point the price has reached.
Low – The lowest point the price has reached.
Close – The price at which the market closes at.

OHLC chart

 

 

Benefits of the Bar Chart

 

predicting forex trendsPredicting Trends

Bar charts are useful in predicting future trends due to the 4 key components that can be analysed. We will be looking at various analysis techniques later on in this course.

 

bar chart informationA Range of Information Available

Bar charts show the ‘completeness‘ of information with an ability to determine the range within a period.

Traders often look at bar charts to observe range comparisons. If a bar’s range is completely inside a previous bar, known as a ‘inside bar‘ or completely outside the previous bar, known as a ‘outside bar‘, then you can spot the market’s ‘indecision‘ which can precede big moves.

inside bar
outside bar

 

Drawbacks of the bar chart

 

bar chart infoToo Much Information

There are slight drawbacks with bar charts, mainly surrounding the noise that so many components produce. There is a perceived difficulty of ‘assessing’ the bar chart due to the overabundance of information – in comparison to the clearer alternative of a line chart.

 

candlestick barsSwings Are Hard To See

Another drawback is that the swings are not always as clear in a bar chart, something that the candlestick chart aims to solve.

LESSON SUMMARY:

– The bar chart, is slightly more complex than the line chart. At any one given time, there are 4 key components of price that can be analysed.

– The bar chart is also commonly referred to as the OHLC chart, derived from the 4 key components that it consists of;

  • Open – The price at which the market opens at.
  • High – The highest point the price has reached.
  • Low – The lowest point the price has reached.
  • Close – The price at which the market closes at.

Lesson tags: free forex course
Back to: Free Forex Course > Step 5 - Different Types of Charts
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