Knowing about chart types and their elements will help you make competent forecasts on price movements and find the right point to enter a trade.
Chart types
Olymptrade offers four chart types. You can switch between them in the chart window.
An Area chart gives you a clear view of price movements. It’s essentially a line chart with the area below the line filled in. For beginners, area charts provide an easy way to understand an overall trend. Still, they lack detailed information like open, close, high and low prices for the period displayed.
A Japanese candlestick chart consists of vertical rectangles called candlesticks. Each candlestick stands for a single period, depending on the chosen timeframe. For example, on a 5-minute chart, each candlestick shows a price action that lasted for 5 minutes. The “body” (filled part) represents the opening and closing prices, while the “wicks” (lines) display highs and lows. If the price rose during the period, the candlestick is green, while if the price fell, the color is red.
Candlestick charts are convenient for visual analysis. They help to identify market reversals or continuations, and are a part of many trading strategies.
A Heikin Ashi chart has modified candlesticks, which average the price data to show a smoother trend. While they make spotting trends easier, Heikin Ashi charts display price information with a delay compared to Japanese candlestick charts.
Bars are similar to candlesticks. The only difference is that it has flat lines instead of bodies filled with color. As a result, bars may be harder to understand visually for a beginner. Candlesticks might be a better option until you’re comfortable reading bar charts.
Tip: As a beginner, start with an Area chart to understand basic trends and gradually shift to candlesticks for detailed analysis.
Timeframes
Timeframes signify the duration of each bar or candlestick on the chart. A 5-minute (5m) timeframe means each point represents five minutes of trading data. The panel for switching between timeframes is also in the chart window.
A timeframe’s length will give you an indication of how long the resulting trade should be:
- Shorter timeframes (5s to 30m) are useful for short-term or “scalp” trades, where you aim to profit from small price changes that occur over seconds or minutes. These trades can be riskier due to rapid price fluctuations. Many FTT traders focus on these timeframes.
- Medium timeframes (1h to 4h) are suitable for day trading. They provide a balance between seeing a broader trend and reacting to recent price changes. As a result, you get a good ratio of risk to reward.
- Longer timeframes (1d, 7d, 1M) work best for long-term or “swing” and “position” trades, where you aim to profit from larger price changes over weeks or months in Forex trading mode. In addition, these timeframes can help you learn about overall market trends and reduce the risk of making hasty decisions.
Tips: Start with medium timeframes to understand general trends before entering shorter, riskier timeframes. For any trade, check a timeframe that is one or two levels bigger than the timeframe you want for your trade. This way, you’ll be able to see a bigger picture of the price’s movements. For example, if there’s an uptrend on the 30m chart but a downtrend on the 1h chart, the odds are that the price will eventually go downward in line with the bigger trend.
Next
In the next lesson, you’ll learn more about trends.