Type of Charts
There are many types of charts but usually the three main
types are Line Chart, Bar Chart and Candle Stick, besides that it is all depend
upon the individual analyst or chart reader that with what type of chart he/she
is comfortable to bring out the correct study or conclusion from the chart.
Let’s study Types of charts in little more detail:
Line Chart
© Chart photo copyright by CHARTIST blog
This chart is the very basic chart type of all. In this
chart there only one line is shown moving up and down in one flow means it
connect from last point to next point or price data by line. Usually line chart
is used on only one price and that is for day’s closing price for daily chart
analysis. But the problem with this type of chart is that you can’t see the
whole day activity in that line chart , means you don’t able to see the open,
high and low prices on the chart, you can only see the one line connecting from
the last point and i.e. closing prices only.
Line chart type benefit is only that it gives you the idea
that how the price traveled in one single view you can see how the stock
performed historically.
Bar Chart
© Chart photo copyright by CHARTIST blog
In bar chart bar are shown vertical and every bar represent
price activity of that one period. Bar chart can be formed as short as in 1
minute time frame to as long as many years of historical charts. If bar chart
is used on 5 minutes time frame than each vertical bar shown on the chart is
represent one bar for 5 minutes period, means it shows the open high low and
closing prices of that 5 minutes in one single vertical bar itself. Same way if
the bar chart selected for the daily chart than one single bar will represent
the whole day activity and days open, high, low and closing price will show in
one single bar itself.
How to Read the prices in vertical Bar:
1) Opening Price : Left hand of the vertical bar
2) High Price : Top of the Vertical bar
3) Low Price : Bottom of the vertical bar
4) Closing Price : Right hand of the vertical bar
Please check the above chart picture to understand easily.
It is very important for technical analysis that chart
showing the prices must have all four prices in it i.e. Open ; High ; Low ;
Close. All these price data gives much
more depth for analyzing the movement by plotting the data into the time frame.
Candlestick Chart
© Chart photo copyright by CHARTIST blog
It is similar to bar chart as far as price data is concerned
as candlestick charts also included all four important price data like Open,
High, Low, Close. Candlestick charts can be used in any time frame from 1
minute’s to5 minutes to 15 minutes to 30 minutes to 1 hour to several hours to
daily, weekly monthly and yearly.
Same like in bar chart, here also in candlestick chart, and
each candle represent the particular one period, suppose you selected the
candlestick chart in 30 minutes time frame than that each candlestick will be
shown the prices of Open, High, Low and Close of that particular 30 minutes.
But there are some more details in each candlestick
formation: it is called Open Candle and Closed Candle
Open Candle : Open candle means if the closing price is
higher than opening price of that particular candle than it is called “Open
Candle” and it will be shown in Blue color by default.
Close Candle : If the price is closed lower than the opening
price of that particular candle than it is called “Closed Candle” and it will
be shown in Red color by default.
Each Candlestick made of two components, one is Body mean
the thick solid vertical bar just like a candle and another component is the
shadow of the candlestick.
Candle Body : It
looks like thick and solid bar just like a candle and it consist the open and
close price, means the top of the solid thick body in each candle represent the
opening price of that particular time frame and in a same way the bottom of the
solid thick body of each candle represents the closing price.
Candle Shadow : Most of the time each candle have the extra
vertical thin line which is coming out from top & as well as from bottom of
the solid thick body of candle, these vertical thin lines called shadow (but I
personally call the top line is flame of the candle and bottom line same as
shadow, I think it makes more relevant to candle, than both are shadow, I think
most of you will agree on my logic) anyways back to the learning, the thin vertical line or shadow (or flame in
my language) on upper part of the solid thick body is represents the high price
for that particular time frame candle and in same way the thin line or shadow
below the bottom of the solid thick body of candle represent the low price of
that particular time frame of the candlestick.
Candle stick chart is one of the best for technical analysis
in comparisons to above two i.e. Line chart & Bar chart. As there are many
candle patterns which gives the clear view to the analyst which way is the
movement going to happen.
Will explain many trading strategies and patterns of
candle sticks in our future articles.
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