Charts are the language of the financial markets. They visually represent price movement over time and help traders analyze trends, patterns, and potential trade opportunities. Choosing the right chart type is essential for accurate technical analysis.
Below is a clear, in-depth guide to the most commonly used chart types in trading, especially in forex, gold, indices, and CFDs.
1. Line Chart
What is a Line Chart?
A line chart displays price movement by connecting closing prices over a specific period with a continuous line.
Key Features:
- Uses only closing prices
- Very clean and simple
- Best for identifying overall trends
Advantages:
- Easy to read
- Removes market noise
- Ideal for beginners
Disadvantages:
- No information on intraday price action
- Hides volatility, highs, and lows
Best Used For:
- Long-term trend analysis
- Macro market direction
- Beginners learning market structure
2. Bar Chart (OHLC Chart)
What is a Bar Chart?
A bar chart shows four key prices:
- Open
- High
- Low
- Close (OHLC)
Each bar represents one time period.
How to Read It:
- Top of the bar = High
- Bottom of the bar = Low
- Left tick = Opening price
- Right tick = Closing price
Advantages:
- Shows full price range
- More detailed than line charts
- Good for price action analysis
Disadvantages:
- Less visually intuitive
- Harder for beginners to read
Best Used For:
- Technical traders
- Price structure analysis
- Professional market analysis
3. Candlestick Chart (Most Popular)
What is a Candlestick Chart?
Candlestick charts show the same OHLC data as bar charts but in a visual, easy-to-read format.
Each candle has:
- Body → open to close
- Wicks (shadows) → high and low
Candle Colors:
- Bullish candle → price closed higher
- Bearish candle → price closed lower
Advantages:
- Visually intuitive
- Shows market psychology
- Supports pattern recognition
Disadvantages:
- Can create information overload for beginners
- Requires practice to master
Best Used For:
- Forex & gold trading
- Pattern trading
- Short-term & long-term analysis
4. Heikin Ashi Chart
What is Heikin Ashi?
Heikin Ashi is a modified candlestick chart that averages price data to smooth market noise.
Key Differences:
- Candles don’t represent exact OHLC values
- Trends appear cleaner and clearer
Advantages:
- Excellent for trend identification
- Reduces false signals
- Smooth price movement
Disadvantages:
- Not suitable for precise entry/exit
- Lagging compared to normal candlesticks
Best Used For:
- Trend trading
- Swing trading
- Trend confirmation
5. Renko Chart
What is a Renko Chart?
Renko charts focus only on price movement, ignoring time completely.
- New brick forms only after price moves a fixed amount
Advantages:
- Eliminates market noise
- Very clear trend direction
- Great for support & resistance
Disadvantages:
- No time-based information
- Delayed signals
Best Used For:
- Trend followers
- Breakout strategies
- Noise-free analysis
6. Point and Figure (P&F) Chart
What is a Point & Figure Chart?
This chart type uses X’s and O’s to represent price movements and ignores time.
- X = rising prices
- O = falling prices
Advantages:
- Highlights major trends
- Excellent for long-term analysis
- Filters out minor price fluctuations
Disadvantages:
- Complex to learn
- Not popular among beginners
Best Used For:
- Long-term trend analysis
- Institutional-style trading
7. Range Chart
What is a Range Chart?
A range chart creates a new bar only when price moves a predefined range.
Advantages:
- Focuses on volatility
- Removes sideways noise
- Clear entry signals
Disadvantages:
- Ignores time
- Needs customization
Best Used For:
- Scalping
- Short-term trading
Comparison Table
| Chart Type | Uses Time | Shows OHLC | Best For |
|---|---|---|---|
| Line | ✅ | ❌ | Trend overview |
| Bar | ✅ | ✅ | Price action |
| Candlestick | ✅ | ✅ | All traders |
| Heikin Ashi | ✅ | ❌ (averaged) | Trend clarity |
| Renko | ❌ | ❌ | Trend & breakouts |
| Point & Figure | ❌ | ❌ | Long-term trends |
| Range | ❌ | ❌ | Scalping |
Which Chart Type Should You Use?
For Beginners:
✅ Candlestick charts
✅ Line charts for clarity
For Trend Traders:
✅ Heikin Ashi
✅ Renko
For Price Action Traders:
✅ Candlestick
✅ Bar charts
Pro Tip from Experienced Traders 💡
There is no “best” chart type. The best chart is the one you understand deeply and use consistently.
