Home » Investing » Top 4 charts used for technical analysis

Top 4 charts used for technical analysis

Chart is the  way of calculating and establishing securities through analyzing statistics achieved by market activity, such as past prices and volume.If we analyze technically then we can say that these  charts are the  same to those charts that we look from any business point of view . Therefore we can say that a  graphical representation of a series of prices over a set time frame is called chart.These charts aid in conducting an effective stock market technical analysis.

Following are the  four  most popular charts in stock market technical analysis. They are candlestick chart, line chart,open-high-low-close-chart and point and figure charts.

Candlestick chart

The chart that was used in the very beginning by Japanese in the 17th century for rice trading is candlestick chart. This early version of technical analysis was different from the US version initiated by Charles Dow around 1900, but somehow  many of the guiding principles were very similar. A candlestick chart describes the high, low, opening and closing prices for a security for a single day.

Candlestick Chart

The wide part is called Real body and tells investors that closing price is lower or higher than the opening price. It changes its shape based on the relationship between the day’s high, low, opening and closing prices. It helps stock market technical analyst to enter and exit trade. On comparing  candlestick chart to traditional bar chart, we will see that many traders consider candlestick charts more visually appealing and easier to interpret because each candlestick provides an easy way of interpretation.

Line chart

The Line Chart is represented by a series of data points joined with a straight line.

It is the most basic of the four charts because it shows only the closing prices over a period of time. To form a line, connect the closing prices by the time frame.

Line Chart

It does not give visual information of the trading range for the individual points such as the high, low, and opening prices. The closing price is considered to be the most important price in stock data.

Open-high-low-close-chart

It is used to illustrate movements in the price of financial instruments over time. On the chart, each vertical line shows the price range over one unit of time such as one hour or one day.

Open-high-low-close chart

This is the securities chart that clearly shows the opening, high, low, and closing prices for a security.

Point and figure charts
This chart is another effective chart  used by the investors. This chart gives information about price movements and is not concerned about time and volume in the formulation of the points.

Point and figure

This technique is almost 100 years old. These charts are based on price action, not time. If there is no significant price moves, nothing will change.

Facebooktwittergoogle_plusredditpinterestlinkedinmailby feather

About Emaad Qureshi