Technical Analysis

 Beginners / Forex Market Basics / Technical Analysis / Charts


The basis of technical analysis, of course, is the graphs of the movement of prices of one or another exchange instrument. Before proceeding to the description of the types of price charts, we introduce some concepts that will be widely used in the future:
Opening price (open) - the price of the first transaction of the period in question. When analyzing daily data, the opening price is especially significant, since it reflects the unanimous opinion that all market participants reached by morning.
Closing price (close) - the last price for the given period. Due to its wide information availability, this price is most often used in analysis. Most analysts consider the correlation between the opening price (first price) and closing (last price) important. It is clearly visible on the graphs.
Maximum (high) - the highest price of the instrument for a given period. This is the level at which there were more sellers than buyers.
Minimum (low) - the lowest price of the instrument for a given period. This is the level at which there were more buyers than sellers.
Volume - the number of shares (or contracts) for which transactions were concluded for a given period. The relationship between prices and volume is of great analytical value. However, it is of little use for the FOREX market, because due to the colossal volumes for today there is no real opportunity to track all the operations performed and their total volume in real time.
Demand (buyer) price (bid) - the price that a market maker is willing to pay for an exchange instrument.
The offer (seller) price (ask) - is the price at which the market maker is ready to sell the exchange instrument.
The studied charts can reflect the dynamics of stock exchange instruments at various time intervals. We indicate the most commonly used periods:
Monthly Chart - grouping data by month.
Weekly Chart- group data by week.
Daily Chart - daily data grouping.
Intra-Day Chart - intraday charts:
   • Hourly Chart - hourly chart.
   • Semi-hourly Chart - a half-hour chart.
   • Quarterly Chart - 15-minute chart.
   • 5-minutes chart - 5-minute chart.
According to the way of presenting graphical information, the following types of graphs are widely used around the world:
Line Charts

A line graph is the simplest kind of graph. The line shown on the daily chart of the EUR / USD rate connects closing prices for each day. Dates are horizontal bottom, and prices are vertical right.
The bar chart shows the opening price (if known), maximum, minimum and closing price. It is worth noting that in those cases when a particular exchange instrument is quoted without gaps (large gaps between “neighboring” quotes), the opening level is lowered, since it practically coincides with the closing level of the previous bar.
Bar presentation is the most common type of chart used in the analysis of securities. As you can see from the graph, the upper point of each of the vertical bars represents the maximum price for a given period, and the lower - the minimum price value. A dash on the right side of the bar indicates the closing price. If the analyst has opening prices, they are marked with dashes on the left side of the column if necessary.
Candle Sticks/Japanese Candles
As you can see from the picture, “Japanese candles” are very similar to bars. The main difference is that the "Japanese candle" has a "body". If the closing level is higher than the opening level, then the “candle body” is white, but on the contrary, it is black (in almost any modern technical analysis package you can arbitrarily assign the colors of the candle body). Among other things, the so-called “shadows” can be distinguished in the representation of Japanese candles: the interval between the maximum value and the upper edge of the “candle body”. The upper “shadow”, the segment between the lower edge of the “candle body” and the minimum is the lower “shadow”.
In conclusion, it is worth noting that we did not get acquainted with all the graphical representations of information. Along with the considered types of graphs, it is possible to indicate, for example, equally-sized, dot-digital, logarithmic graphs, etc. However, for our further purposes they are of little use.

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