If you have ever looked at a forex chart and felt overwhelmed by the coloured bars and cryptic indicators, you are not alone. But the basics are straightforward once you know what you are looking at.

What a Forex Chart Shows

A forex chart displays the price of one currency against another over time. The horizontal axis is time; the vertical axis is the exchange rate. On an AUD/USD chart, if the line is going up, the Aussie is strengthening. If it is going down, it is weakening.

Simple enough. But things get more interesting when you look at the different ways price data can be displayed.

Three Chart Types

Line Charts

The simplest form. A line chart connects the closing prices for each time period with a continuous line. It gives you a clean view of the overall trend but hides a lot of detail about what happened during each period.

Line charts are good for getting a quick sense of direction, but most serious traders use one of the other two types.

Bar Charts (OHLC)

A bar chart shows four data points per period: the Open, High, Low, and Close (OHLC). Each period is a vertical bar. The top is the high, the bottom is the low, and small horizontal ticks show the open and close. Bar charts reveal how much price moved during each period, not just where it ended up.

Candlestick Charts

Candlestick charts show the same OHLC data in a more visual format. Each period is a “candle” — a rectangular body with thin lines (“wicks”) extending above and below.

If the close is higher than the open, the body is green or white (“bullish”). If lower, it is red or black (“bearish”). The wicks show the high and low.

Candlesticks are the most popular format among forex traders. The colour coding makes it easy to see whether buyers or sellers controlled each period.

Timeframes

Forex charts can be set to virtually any timeframe: 1-minute and 5-minute for day traders, 1-hour and 4-hour for swing traders, daily for position traders, and weekly or monthly for long-term analysis.

The timeframe depends on your trading style. For the big picture — say, AUD/USD over the next year — a daily or weekly chart works. For timing an entry in the next few hours, go shorter. A good habit is to check multiple timeframes, since a bullish-looking 1-hour chart might just be a minor retracement on the daily.

Support and Resistance

Two of the most fundamental concepts in chart reading are support and resistance.

Support is a price level where the currency has historically stopped falling and bounced. Think of it as a floor. If AUD/USD has bounced off 0.6200 three times in six months, that is support.

Resistance is the opposite — a ceiling where the currency has struggled to break above. If AUD/USD has repeatedly failed at 0.6800, that is resistance.

These levels reflect areas where buyers or sellers have clustered. They tend to hold until conditions change. When resistance is broken, it often becomes support, and vice versa.

Moving Averages

A moving average shows the average closing price over a set number of periods. The two main types are the Simple Moving Average (SMA) — a straight arithmetic average — and the Exponential Moving Average (EMA), which gives more weight to recent prices.

Moving averages smooth out noise and reveal the trend. Price above the average is generally bullish; below is bearish.

A popular signal is the “crossover” — when a shorter-term average crosses a longer-term one. The 50-day SMA crossing above the 200-day is a “golden cross” (bullish). The reverse is a “death cross” (bearish).

Volume

Volume measures how many units were traded during a period. High volume during a price move suggests conviction — the move is more likely to stick. Low volume suggests the move may be unreliable. Since forex is decentralised, most platforms show tick volume (the number of price changes) as a proxy.

Putting It All Together

Reading a forex chart comes down to a few questions: What is the trend? Where are support and resistance? Is volume confirming the move? What are moving averages signalling?

No single indicator works alone. The best chart readers combine tools and cross-reference with fundamental analysis — economic data, central bank policy, and geopolitical developments. Start with a daily candlestick chart, add a 50-day and 200-day moving average, mark the key levels, and you have a solid foundation.

James Hargreaves is a Sydney-based financial journalist covering currencies and macro markets.