The chart is your window to the market's mind. Choose the wrong view, and you'll miss the story. While beginners randomly switch between chart types, professionals use each strategically—Line charts for macro trends, Candlesticks for execution. The difference between seeing the market clearly and trading blind is often just knowing which chart to use when.
Welcome to This Lesson
You've learned critical skills. Now, let's explore the foundation of technical analysis: Chart Types.
The same price data can tell completely different stories depending on how you visualize it.
The Professional Difference: Retail traders pick one chart type and stick with it forever. Professional traders use different chart types strategically: Line charts for identifying macro trends without noise, Candlestick charts for reading detailed price action and executing with precision. Each chart type reveals different information from the same data.
Lesson Chapters
1Chapter 1: The Four Core Data Points (OHLC)⏱️ ~2 min
Every point on a forex chart represents four essential pieces of data for that period: OHLC.
The Four Data Points
Open (O): The price when the period began
High (H): The highest price reached during that period
Low (L): The lowest price reached during that period
Close (C): The price when the period ended
Why OHLC Matters
All four points: Full information for precise analysis (Candlestick, Bar)
Only Close: Simplified trend view (Line)
High/Low wicks: Show rejection and liquidity hunts
Open/Close body: Shows who won the battle (buyers or sellers)
Professional Insight: The Close is often considered the most important price because it represents the final settled sentiment for that period. A Close far from the Open shows conviction.
2Chapter 2: The Candlestick Chart⏱️ ~4 min
The Candlestick chart is the format of choice for virtually all professional forex traders. It provides the richest visual story of price action.
Anatomy of a Candlestick
A candlestick has two main parts: the body and the wicks (shadows).
The Body (Battle Result)
Green/Blue/White Body (Bullish):
- Close price was higher than Open price
- Buyers (bulls) dominated the period
- Bottom of body: Open price
- Top of body: Close price
Red/Black Body (Bearish):
- Close price was lower than Open price
- Sellers (bears) dominated the period
- Top of body: Open price
- Bottom of body: Close price
Body Size Reveals Conviction:
- Large body: Strong conviction, decisive winner
- Small body: Weak conviction, nearly equal battle
- No body (Doji): Perfect balance, indecision
The Wicks/Shadows (Rejected Extremes)
Upper Wick (Upper Shadow):
- Shows how high buyers pushed price
- Length reveals strength of rejection by sellers
- Long upper wick = sellers rejected higher prices
Lower Wick (Lower Shadow):
- Shows how low sellers pushed price
- Length reveals strength of rejection by buyers
- Long lower wick = buyers rejected lower prices
Wick Analysis:
- Long wicks: Show strong rejection (institutional orders)
- No wicks: Show conviction (one-sided dominance)
- Wicks at key levels: Reveal liquidity hunts
Why Candlesticks Dominate
At a Glance, You See:
- Who won the period (color/direction of body)
- How decisively they won (size of body)
- Whether extremes were rejected (length of wicks)
- Market psychology (conviction vs. indecision)
3Chapter 3: Bar and Line Charts⏱️ ~3 min
The Bar Chart
The Bar chart displays the same OHLC data as candlesticks, but less visually impactful.
The Vertical Line:
- Bottom: Low price
- Top: High price
Left Horizontal Tick: Represents the Open price
Right Horizontal Tick: Represents the Close price
Bullish Bar: Right tick (Close) is higher than left tick (Open)
Bearish Bar: Right tick (Close) is lower than left tick (Open)
Why Less Common:
- Takes longer to determine if bullish or bearish
- No color coding for instant recognition
- Harder to spot patterns quickly
Professional Verdict: Bar charts are functional but inefficient compared to candlesticks.
The Line Chart
The Line chart is the most basic chart type, showing only the Closing Price of each period.
What You See:
- Single continuous line
- Only closing prices
- Smooth, flowing representation
What You Don't See:
- Intraday volatility
- High and Low extremes
- Wicks and rejection
- True range of movement
When to Use a Line Chart
Visualizing Macro Trends:
- Clean trendlines (no confusing wicks)
- Obvious Higher Highs / Higher Lows
- Clear trend direction
- Psychological levels stand out
Identifying Key Support and Resistance:
- Closing price = final settled sentiment
- Removes noise from intraday wicks
- Shows where market truly "accepted" price
- Key levels become more obvious
Critical Caution: Never use a Line chart for trade execution.
Why?
- You can't see the High and Low
- Can't calculate safe Stop Loss placement
- Can't determine true pip risk
- Can't identify wick rejections
Professional Rule: Use Line charts for macro analysis only. Always switch to Candlesticks for execution.
4Chapter 4: Professional Multi-Chart Workflow⏱️ ~3 min
A professional trader uses each chart type strategically.
The Professional Chart Selection Matrix
| Chart Type | Primary Use | Best For | Never Use For |
|---|---|---|---|
| Candlestick | Execution & Detailed Analysis | Reading price action, setting precise SL/TP, identifying patterns | Long-term macro trend without noise |
| Line | Macro Trend Analysis | Identifying overall trend, drawing clean trendlines, spotting key S&R | Trade execution (no High/Low data) |
| Bar | Legacy Reference | Compact view on small screens | Modern professional trading |
The Professional Trading Workflow
Step 1: Macro Analysis (Line Chart)
- Timeframe: Daily or H4
- Purpose: Identify overall trend
- Actions: Draw major trendlines, Mark key S&R levels, Establish directional bias
Step 2: Structure Analysis (Candlestick Chart)
- Timeframe: H4 or H1
- Purpose: Identify entry zones
- Actions: Find Order Blocks, Mark Supply/Demand Zones, Identify Fibonacci levels
Step 3: Execution (Candlestick Chart)
- Timeframe: H1 or M15
- Purpose: Time precise entry
- Actions: Wait for reversal candle, Measure wick for SL, Calculate pip risk, Execute trade
Why This Workflow Works
Line Chart First:
- Removes noise and confusion
- Makes trend crystal clear
- Identifies key levels cleanly
Candlestick Chart Second:
- Reveals detailed price action
- Shows institutional footprints (wicks)
- Enables precise SL/TP placement
Result: Clear macro direction + precise micro execution = high-probability trades.
Example: Complete Multi-Chart Analysis
Pair: GBP/USD
Step 1: Daily Line Chart
- Clear uptrend: 1.2600 → 1.2750 → 1.2850
- Ascending trendline connects lows
- Bias: Bullish, looking for long entries
Step 2: H4 Candlestick Chart
- Price pulling back to trendline at 1.2820
- Demand Zone at 1.2810-1.2830
- 61.8% Fib retracement at 1.2825
- Confluence: Trendline + Demand + Fib
Step 3: M15 Candlestick Chart
- Bullish Hammer forms at 1.2822
- Long lower wick (13 pips) shows rejection
- Entry: 1.2825
- SL: 1.2808 (17 pips)
- Target: 1.2950 (125 pips, R:R: 1:7.4)
Result: +135 pips ✓
5Chapter 5: Summary, FAQs & Quiz⏱️ ~2 min
Summary
The three primary chart types are Candlestick, Line, and Bar:
Key Principles (0/3)
Professional Approach: Use Line charts for big-picture trend analysis on Daily/H4. Use Candlestick charts for detailed price action and execution on H4/H1/M15.
Frequently Asked Questions
Q1: Can I trade successfully using only a Line chart?
No. While the Line chart is excellent for macro trend identification, it lacks the High and Low prices needed to set a structurally safe Stop Loss. Use Line for analysis, Candlestick for execution.
Q2: Why is the closing price considered so important?
The closing price reflects the final, settled sentiment of the market for that period. Institutional traders pay close attention to where the market closes relative to the Open. A close far from the open shows strong conviction.
Q3: Should I change the color of my candlesticks?
Stick to standard convention: Green/Blue/White for bullish and Red/Black for bearish. Consistent color coding helps your brain process information instantly.
Quiz
Which four data points are represented on a Candlestick or Bar chart?
The primary reason professional traders prefer Candlestick charts for execution is that they clearly convey:
Which chart type is best for smoothing out price noise and identifying macro trends based solely on closing prices?
In a bearish Candlestick (Red/Black), the top of the body represents the:
What is the professional workflow for using different chart types?
Call to Action
You've learned how the market speaks through its charts. Now commit to using the right chart for each task!
Master Multi-Chart Analysis
Practice switching between Line and Candlestick charts on a demo account. Learn to identify macro trends with Line charts, then execute with precision using Candlesticks. Experience the clarity that comes from using the right chart for each task.
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Proceed to Next Lesson: Trendlines, Channels & Chart Patterns
Prerequisites
Before studying this lesson, ensure you've completed:
Ready to see the market clearly? Understanding chart types is essential for both macro analysis and precise execution.
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