Before you begin doing any technical analysis, you need to learn what chart types exist out there, as this is one of the most crucial things needed to be able to trade correctly. In this article, we will have a closer look at some of the most popular chart types that are available in the Meta Trader 4 terminal by default and how to access them.
1. Bar chart types
One of the common chart types, bar charts (alternatively called OHLC bars, the abbreviation for Open, High, Low, Close) – are charts where each bar represents the high point (the top end of the bar) and the low point (lowest end of the bar), which the price reached during a given time period, as well as the opening price (the dash to the left of the bar) and the close price (the dash to the right of the bar). Note, that we recommend using bar charts only on timeframes above 5 minutes, as this way you will be able to get the most out of them. A quick way to access this chart type in Meta Trader is pressing the Alt+1 key combination.
Such charts are not very informative when trying to determine trends however, and this bring us to the next item on our list.
2. Tick, or Line Charts
Line charts are extremely simple, and are based on the price at which each time period (determined by your timeframe) closed. These prices are interconnected by a simple, straight line. A quick way to access the line chart type in your platform is pressing the Alt+3 keys.
Line charts, while being oversimplified at first glance, are commonly used to visualize trends and give a general understanding of where the market is going. Note, that there are several custom variations of these charts out there, which include line charts based on open prices, highs and lows for each period, and even averages of these values.
However, while analyzing such a chart it is impossible to tell anything about how the prices behaved during the individual time periods of your timeframe, and this information is very important for forecasting changes in the market movement. It is also impossible to tell if any price gaps occurred at any point when looking at a line chart, and this information is very important to determine the volatility of the market. In other words, a line chart represents every time period with a simple dot which can hardly cover the real picture of what is going on with the price. This is why line charts are much less used for complex technical analysis than the next guest on our list.
3. Japanese Candlesticks
Japanese candles provide the most extensive amount of information concerning how a currency pair behaved during each period. As you may have guessed by their name, the Japanese candlesticks chart type was first invented in Japan, and initially used to monitor the domestic prices of rice. Eventually, the ideas behind Japanese candlesticks was adapted by traders all over the world, and applied to many markets, including Forex. With them, you can best understand the market conditions, because they don’t just show how much a price has moved, but also the power of this movement. Here’s a detailed view of how these candles look:
There are two types of candles. Depending on your chart settings they can be filled or empty, or green and red. And empty or red candle indicates a trading period during which the close price is higher than the open price, i.e. a period during which the price of the asset rose up. A filled, or red candle, represents a trading period during which the close price is lower than the open price, i.e. a period during which the price declined. In this example, we will use red and green candles.
The open price of a green candle is determined by the lowest point of its body. The close price of a green candle on the other hand is determined by the highest point of its body. All of this works vice versa for red candles. The low point during a trading period is indicated by the lowest point of the candles shadow. The high point of a trading period is the highest point of a candles shadow.
To select this chart type quickly in your MT4, you may use the Alt+2 shortcut on your keyboard.