Type of Charts for Technical Analysis-Part-1
The charts
What is a chart?
Charts are used by the technical analysts or investors as a working tool. They use charts to plot the price movements of a stock over specific time frames. It’s a graphical method of showing where stock prices have been in the past.
A chart gives us a complete picture of a stock’s price history over a period of a Minute, hour, day, week, month or many years. It has an x-axis (horizontal) and a y-axis (vertical). Typically, the x-axis represents time; the y-axis represents price. By plotting a stock’s price over a period of time, we end up with a pictorial representation of any stock’s trading history.
A chart can also depict the history of the volume of trading in a stock. That is, a chart can illustrate the number of shares that change hands over a certain time period.
There are various type of Charts, in this series we are explaining following two type of charts only.
Types of price charts:
1. Line charts
“Line charts” are formed by connecting the closing prices of a specific stock or market over a given period of time. Line chart is particularly useful for providing a clear visual illustration of the trend of a stock’s price or a market’s movement. It is an extremely valuable analytical tool which has been used by traders for past many years.
2. Bar chart
Bar chart is the most popular method traders use to see price action in a stock over a given period of time. Such visual representation of price activity helps in spotting trends and patterns.
Although daily bar charts are best known, bar charts can be created for any time period - weekly and monthly, for example. A bar shows the high price for the period at the top and the lowest price at the bottom of the bar. Small lines on either side of the vertical bar serve to mark the opening and closing prices. The opening price is marked by a small tick to the left of the bar; the closing price is shown by a similar tick to the right of the bar. Many investors work with bar charts created over a matter of minutes during a day’s trading.
