Each participant of Forex trade knows that the chart is a certain picture of opinions, thoughts and expectations for a given period of time. A visual way is the most intelligible way of analysis. And all the financiers realize this. That’s why they have invented some ways to “paint” the marketcollisions.
One of the prices for the periods specified beforehand is taken for constructing a line graph. As a rule, in most cases closing prices for each standard time interval are applied for this. These prices are sometimes called the latest prices. Usually the closing prices are among the most important just for daily, weekly, monthly charts, etc. However, opening prices, Low (the minimum prices for the entire period), and High (maximum prices for the entire period) prices or so-called synthetic options: Typical Price – ([Low + High + Close] / 3) or Median Price – ([Low + High] / 2) can also be used. Points on the graph are connected by line segments. As a result, the price chart looks like thejogged line.
Among the advantages of the line price chart the traders distinguish convenience when looking for the figures of technical analysis that are called patterns, and the lack of redundant information that distracts and does not allow to concentrate on the analysis of the chart. This chart, of course, can not display all the information about the changes in prices on the currency market. It is convenient to use the line chart when thereare not sufficient data, or when the Forex rates do not fluctuate too much within one time interval, and change more smoothly.
The fact that the chart is formed only on one type of price is attributed to the disadvantage of the line chart. It does not allow determining whether rise or fall in prices within a specific trading period was significant or not. The second drawback is that one can not see whether the price gaps between the closing of one period and the opening of another one has occurred.
The line chart will also be very useful for the beginners. You will be able to clearly see the direction of the Forex market, and it will be much easier to build support and resistance lines. But it should also be noted that the line chart have to be used only in conjunction with other types of charts. And of course, you must constantly increase the level of your Forex education. Only in this case the analysis of Forex will be the most accurate and appropriate.