To the untrained eye, a forex chart looks like a chaotic jumble of green and red boxes. But those boxes — Japanese candlesticks — tell a very clear story about buyer and seller psychology.
1. Types of Charts
The three most common ways to view price data are Line Charts, Bar Charts, and Candlestick Charts. Today, 99% of professional retail traders use Candlestick Charts because they pack the most visual information into a single image.
2. Anatomy of a Candlestick
Every candlestick represents a specific timeframe (e.g., 1 hour, 1 day) and contains four vital pieces of data:
- Open: The price at the beginning of the period.
- Close: The price at the end of the period.
- High: The absolute highest price reached during the period.
- Low: The absolute lowest price reached during the period.
3. Understanding Timeframes
Choosing your timeframe changes how you see the market:
- M1 to M15: Used by scalpers looking for quick setups. Highly chaotic.
- H1 to H4: Used by day traders looking to catch intra-day trends.
- Daily (D1) & Weekly (W1): Used by swing traders to spot macro trends and major support/resistance levels.
4. Identifying Support and Resistance
Support is the "floor" where price has bounced up multiple times. Resistance is the "ceiling" where price has failed to break through. Finding these levels is step one in charting.
5. Drawing Trendlines
A trendline connects the "higher lows" in an uptrend, or the "lower highs" in a downtrend. A break of a significant trendline is often the first signal of a major market reversal.