Line and Dot Chart Forex Trading Software

Line and Dot Chart Forex Trading Software

There are a lot of forex trading software systems on the market and many of them relate to the charts used in trading.  Many traders use a number of different charts in their trading systems with the most common being the candlestick chart.  However, there are traders that use line and dot charts in their trading.  This is not as common because of the limited about of information a forex trader can get from these charts.  Of course, to cover all bases when trading it is best that you know about these charts.

Why Forex Trading Software Have These Charts?

Many new traders wonder why software includes these charts if they do not offer much information.  Despite the limitations they have these charts can help a trader get a clear overview of what is happening in the market.  It is easy to determine trends on these charts because of their simplistic nature.  Line and dot charts are able to display a large number of data points in an easy to read manner.

Pros and Cons of Dot Charts

Dot charts are actually the less popular of the two chart types.  These charts are often used for continuous data.  This data can be labelled if the chart does not contain too many of them.  The dot chart is the most simplistic of all statistical charts and only suitable for short time periods.  Many traders believe that you cannot use these charts for time frames longer than a single day.

Even though this chart is simple the calculations which go into their creation are not.  The appearance of the chart is affected by a number of factors including the size of the dot.  It is recommended that data set of 20 or 30 points are used for these charts.  Any more data and the chart will appear cluttered and this makes interpretation more difficult.

Pros and Cons of Line Charts

Line charts are known for their ability to incorporate large amounts of data points while displaying them in an orderly fashion.  Line charts appear, as the name would imply, as a continuous line moving with the trends and ranges in the market.  This is why line charts are used to gain an overview of the market conditions.  These charts can be used for short and long time frames without affecting the ease of interpretation.

Line charts are also able to hold more than 30 data points.  However, the information conveyed by the chart is limited even compared to the dot charts.

Merging the Dot and Line Charts

A lot of new charting software has taken to merging the line and dot charts.  These new line-dot charts connect the closing bid prices which is the data that makes up these charts.  However, the merging of these two charts does not make a chart which is better than the candlestick chart.  The data is still limited and the representation is still simplistic.

It is recommended that forex traders use the candlestick chart because it offers the most information.  These charts are also included with most forex software systems making them easily available.

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