There are several types of Forex charts. There are commonly used ones such as Line, Bar and Candlestick Charts, as well as less commonly used ones such as Equivolume, Kagi and Renko Charts. Regardless of what a chart may look like, the four variables tracked by any Forex chart are:
Every known Forex chart tracks the price of the currency pair in question. The price can be shown in a variety of different ways, but most traders focus on the high price, the low price, as well as the opening and closing prices of a given currency. Through tracking the high and low prices, a pattern sometimes emerges and informs a trader whether the price will rise or fall in the near future.
The volume of a pair is tracked on the Equivolume chart. Experienced traders know that when there is a large amount of activity by either buyers or sellers of a currency, its value will move. If more volume is being sold, the price moves downward, and vice versa will occur when there is a large amount of buying. Often, the end of a trend can first be seen as a reduction in volume on the dominant side.
In most charts, time is an important factor. Some traders consider a particular time of day to coincide with particular types of price movement. Additionally, time is important for traders who are interested in the duration of a particular trend. The duration of a trend can indicate how long it may continue.
For example, if you track a short term trend on a one-hour chart, every minute would be important. Each of these minutes can see several pips of movement. The shorter the duration of your planned position, the more important time becomes to your plan.
Momentum measures where a currency's price has moved. With this information you can often determine where the currency is likely to move next. By tracking the momentum, you can ignore the tiny momentary movements and focus on the significant ones.
A significant movement is one where a previous rising or falling trend is broken. In such cases, the price of a currency tends to rise or fall further than it has recently. During the early parts of these movements, a trader can open a position and profit from the continuation of the trend.