In this article we will look at three basic charts and discuss a number of types of charts technical traders use to identify trends and trading opportunities. These charts can be found in the Easy Forex chart package which is free for use as an account holder at easy forex.


There are three basic charts that are favored by technical traders are, the bar chart, a line chart and candlestick chart. Before we take a look at an example of these charts it's important for you to know that the chart represents the struggle between buyers and sellers. You can use a chart to try and determine who'll win the struggle between buyers and sellers and what the struggle means for future price movements in the market. The battle lines between bulls and bears can be drawn on the chart. If you can predict the winner of the struggle you can profit. Let's take a look at some of the tools a technical analyst may use to protect the outcome of the struggle.


The bar chart is the most common type of chart used. Each bar represents a day's trading showing the lowest to highest price, open & close. Closes are represented by ticks to the right of the high-low bar; opens are represented by ticks to the left of the bar.


A line chart is made by connecting a series of data points together with the line. Line chart can give you a good indication of where the market has been trading over a given time frame.


Last chart we will look at is the candlestick chart. Candlestick charts were commonly used in ancient Japan. The candlestick chart is a combination of the line and bar chart. Each bar represents the range of a price movement over a given time interval.


Your goal as a trader is to use a chart to graph the battle between buyers and sellers of the market over a period of time. Choosing a chart type is your first step.


The chart type that you will select will largely depend on the time horizon that you plan to trade. Time horizons for charts run the spectrum from short-term to long-term. A trader who is looking for quick in and out trades would look to use a tick or Harley chart, a day trader who looks to have no position going home may look at the daily chart at position trader holding a trade for more than a day and possibly weeks and months will look at weekly monthly and annual chart.


Let's take a look at the type of charts and charting tools available for you to use on the Easy Forex trading platform.

The chart types include line and bar charts that we noted above.


The next step is to determine your time horizon and look at the time scales. Here is an example below in the range of time scales from short-term fix to monthly charts as a general rule of thumb the shorter the time frame of the chart the shorter its usage. So for example if you are trading for a few pips you would be using the minutes time scale charts, if you are looking for short-term trends you would be using the hourly charts and if you are looking to identify overall market trend you would start with the daily charts and move towards the weekly and monthly charts.


Once you've established your time trading horizon you can then begin to look at the charting tools that allow you to draw lines and channels and the types of studies that you can apply to your charts. The application of the studies is key to making profitable trading decisions.

One of the key tools technical traders use is drawing of trendlines. The concept of the trend line will be very important for your trading. Trend lines are drawn to determine support and resistance in the market. There are uptrend lines, downtrend  channel lines that connect data points on the chart to try to establish support resistance. Support resistance is a key technical tool for determining levels to buy and sell and can also be used in managing risk. Note in the graph below the trend line drawn forms an uptrend trend. As a trader you could look to the points where the graph meet uptrend and use those points to buy the market.


Summary
Charts are used to try to determine trading opportunities and possible future market trends. Recognition of chart patterns is the key to successful use of charts for trading. There are three basic types of charts that most technical traders use. The bar chart, the line chart, you will and the candlestick chart, There are also types of charts that are based on time horizons. Time horizon covers the very short-term, medium term and long term price history for a given market. There are numerous indicators that traders will employ to try to interpret what chart patterns may say about the market's direction.

Now that you are familiar with the basic chart types and the importance of drawing trendlines on the chart the next step is to become familiar with some basic chart patterns and chart recognition. Recognition of chart patterns and identifying trends is the key goal of chart interpretation. A trader will use a chart to determine the level to buy and sell a market and the timing of when to buy and sell a market. The chart can also be used to forecast the trend.