Types of diagrams for Forex technical analysis

We will skip describing all the approaches of technical analysis in detail – we would have to publish an encyclopedia-sized book. Instead we are going to study some of the main types of charts which are used in TA. These are Line, Tick, Bar and Japanese candle charts.

The basic principle of building a Forex chart is simple: you should draw two datum lines and apply time to the horizontal one (abscissa axis) and prices to the vertical datum (ordinate axis).

The scale of the trading time axis (interval or trade period) can be changed in the trading terminal. Traditionally, the following intervals are used: year, month, week, day, 4-hours, an hour, a half of an hour, a quarter of an hour, five or one minute and “unit quote” or tick. A tick is an unstandardized unit of time. In other words, in comparison with the “one minute” scale, the next value of a tick will be shown on a diagram not after a minute or a lapsed period of time but immediately after a new price appears on the market. Forex price charts price time.

As all price diagrams are formed in accordance with some scale, every period is characterized by four values:

• Opening price (Open) is the price of a currency at the beginning of a trading period. Strictly speaking, there are two prices – Ask and Bid at the beginning of any interval and the opening price is calculated by taking the arithmetic mean of the two prices, which is (Ask + Bid)/2. So the opening price is actually an arithmetic mean (between supply and demand).
• Closing price (Close) is the price at the end of a forex trading period. Strictly speaking, there are two prices – Ask and Bid at the end of an interval but the closing price is calculated by taking the arithmetic mean of the ask and bid prices, which is just the same as in the case of opening price (Ask + Bid)/2. The closing price is an arithmetic mean (between supply and demand) of the last quotation in the given interval.
• Period maximum (High) is the highest price quoted during a trading period (the Ask price is used, as the Ask is always higher than the Bid price).
• Period minimum (Low) is the lowest price quoted for a trading period (Bid price is used as the Bid is always lower than the Ask price).

Sometimes these four values are accompanied by one more indicator – the Tick volume – which shows the quantity of changes of a price for a given period. Sometimes the vertical axis of a diagram contains tick volume values.