Type Of Charts

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

         

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            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        

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           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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What is Chart

What is Chart ?

         Chart made by the combination of two important and basic things, one is time frame and another is price data, If Price data is plotted over time frame than it becomes chart. In the charts generally the vertical axis are known to represent price data and likewise the horizontal axis on charts are known to represent time frame /date etc.

 © Chart photo copyright by CHARTIST blog

Charts and its properties

          Time frame and price scale is used in the chart and it is the basic thing and most important part to plot a chart, besides that one needs to read the chart very closely and with details, because there are several factors which affect the reading of charts and bring out the information from it.

Time Frame

          Price Date can be plotted and make the chart in any time frame, it means you can plot the price date into any time frame length (but u need to have price data of those time frame) in simple words you can create horizontal axis in any time frame from 1 minutes to 5 minutes to hours to weeks to months to years, but if you don’t have price data as per your selected time frame than the hart will show blank.  

          For example : suppose you want to see the chart in 5 minutes time frame but you only have EOD (end of day) data, and when you try to plot that daily data into the 56 minutes time frame chart than it will only show one dot / line / bar / candle stick for each day instead of many lines of 5 minutes each.

It is important to decide which time frame interval is to be used for trading, investing etc.  it all depends what is your trading style and horizon and technique etc. Many traders do intraday trading and many do swing trading and also many do investments for short to medium to long term, it is always advised for all kind of market participants to use technical analysis.

         

         Intraday Trader - For them it is always suitable to concentrate and use the charts time frame as short as from 1 minute to upto 15 minutes or maximum of 30 minutes time frame charts for best results.

        

        Swing Traders – Swing traders are those who take position 1-2 days to couple of weeks. For these kinds of traders it is best to use chart with time frame intervals from few hours to daily time frame charts for best results.

         Short Term Positional Traders – these traders are similar to the swing traders but these traders used to hold their position from couple of weeks to upto 3 months. It is best for them to use the charts with the time frame from daily to weekly and sometimes monthly also.

Medium Term Positional Traders or investors  – These positional traders are usually use technical analysis with combination of fundamental analysis. For these kinds of positional traders it is best for them to use weekly & monthly time frame charts for best result on their investments. These Investors cum traders have mix of both combination as they have the capacity to hold the position from 6 months to upto12 months and even 18 months also or as per the with the return target, so whichever comes first they act on that, suppose the target meet first than they will exit from the trade or they will wait till the target till it achieved and for that they have medium term outlook and have capacity to hold.

         Long Term Investors – These kind of participants are normally never called as traders as they are not trader or speculators , they are entering into the market with a long term perspective and wants to hold their investment positions minimum of 12 months to upto 3 years and even 5+ years also. These investors not much think about technical analysis as their perspective is long term that’s why they rely upon fundamental analysis most of the time. But many of them also use historical data of price chart in the time frame from few months to many years of historical chart.

As far as I think long term investors only needs to check the long term time frame charts and sometime even shorter time frame charts only when they wants to enter into particular stock or into the market and sometimes also when they want to exit from the market or particular stock, why I am saying this is because if suppose for an       Example :  As a long term investor I want to enter into market with amount 1 million into some company stock, and if I don’t know where is market is heading that what can happened ? 

Scenario no. 1- I entered into the stock market by buying some xyz  shares and after I bought  suddenly it price falls down in few days or may be same day.

Scenario no.2 – I entered into the market with buying some shares of xyz Company and after I bought it the stock prices grow steadily upwards direction and I getting profits.

Scenario no.3 – I entered into the market by buying stock of xyz company shares and after I bought it it just stuck to my buying range and not moved for many months, so all those months I just stays invested but not gets anything, not even the bank interest on it.

           

          So in all above 3 scenarios what we understand that charts and technical analysis shows us the best time to enter into the market or that particular stock to safe guard the sudden downfall or stagnant period of that stock. Same thing implied when you are exiting or booking profit from that investment.

          In scenario 1 & 3 if suppose I checked the charts before entering into it and suppose in charts reading the information is clearly showing that the stock is into down trend or expected to fall from the present levels than I might not enter into that particular stock or may be whole market at that point of time, which can save me from the down fall and time of my holding period.

         But it is not always true because sometimes stock falls or rise are so sudden like a spike that even charts also sometimes not able to predict the time that how soon it will rebound. So it is always best for Long Term Investors off-course use Fundamental but at least use Technical analysis at the time of entering & exiting market / stocks for best results. It is always advised by many legends that if you are a long term investors than never try to time the market, instead of that just keep enter into the market at every dips and on every intervals and keep holding your investments for long term for best returns.

Price Data or Scale

Arithmetic and Logarithmic these are the two methods to display the prices on the y-axis on the charts.

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Please do read my other postings also and if you liked it than do support me by simply following this blog and continue reading. You can ask with your queries by clicking on “Ask Me” button on top of the page or by commenting on relevant post. It will be my pleasure if you give me feedback's and also write to me if you think that something needs t be correct. I welcome everyone to follow this blog and also write a post if you have pure knowledge, I welcome Authors to join this blog and spread your knowledge on many financial related topics.

Thanks for reading :) 

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DEMAT ACCOUNT

What is Demat Account ?

         Demat means De-materialization of Shares. In this process by which the physical share certificates are converted into equivalent number of securities in electronic form and are credited into Demat Account. This is the simple way to understand Demat. 
         Another way to understand it in simple lay man language is as follows : 
         Just like Bank account is for keeping money / cash into it. so in a similar way Demat account is for keeping shares and securities in it.

         Demat account is the account in which securities such as Shares, Gold ETF's, Exchnage Traded Funds, Unit's, Bond's etc. are kept in a electronic form & all transactions of these securities are performed thru that account.

          Demat accounts are safest option  to keep you shares and all related securities, it is just like a locker, but in electronic form, where no physical things can be kept. It is safest because keeping shares & all securities in Demat are more safe as compare to physical or paper form, physical certificates having a risk of theft, torn due to age, burn in case of fire, and get lost due to flood or handling etc. even one of the very important fact is bad delivery due to signature mismatch or date /time of delivery etc. when you sell your shares. Demat transaction cost is much less compare to physical transfer of share certificates. Demat helps for hassle free, smooth & easy working.

What documents required for opening an Demat Account

1) PAN Card
2) Address Proof
3) Savings Bank Account
4) Photograph

There are 1000's of Demat services providers are available and are at very competitive rates without any hidden cost.

Benefits of Demats Services :
a) De-materialization
b) Execution of market and also off market trades of securities
c) Re-materialization
d) Facility to convert Mutual Fund Units into Demat
e) Pledge of securities
f) Facility of IDeAS to get Internet based Demat Account Statement anytime
g) Facility of Speed-e service
h) Transaction details thru SMS

Click here to know about "Trading Account"

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Knowledge Zone : Forex ?

Forex ?

What Forex & Forex Trading ?

             Forex is a commonly used for "foreign exchange" and it is generally used to describe a trading in the foreign exchanges market all over the world by speculators, traders and investors.

        Example : Suppose the U.S. dollar is expected to weaken in value relation to Euro. Now the forex trader in this situation will sell Dollars and buy Euros. If Euro strengthens, the purchasing power to buy Dollars has now increased. The trader can now buy back more Dollars than they had to begin with, making a profit.

         It is just similar to stock trading. Stock trader will buy a stock if they think its price will rise in the future and sell a stock if they think its price will fall in the future. Same as in with the forex trader will buy a currency pair if they expect its exchange rate will rise in the future and sell a currency pair if they expect its exchange rate will fall in the future.

Exchange & Rates ?

          Forex market or Foreign exchange market is a global decentralized marketplace it determines the relative values of all traded currencies on these exchanges. Trading of these transactions are conducted by several market participants in many locations all over the world. It is rare that any two currencies will be identical to one another in value, and it's also rare that any two currencies will maintain the same relative value for more than a short period of time. In forex, the exchange rate between two currencies constantly changes.

         Example : Suppose on 15th April 2014, one Euro was worth about $1.51 ,  By 10th June 2014, one euro was worth about $1.66 ,  It means Euro increased in value by about 10% relative to the USA Dollar or USD during the periods.

Why Exchange Rates Change ?

              Demand and supply is the basic and thumb rule for any price fluctuation in any commodity, stocks, currencies, real estate and even in job market.

       Just like stocks, bonds, computers, cars, and many other goods and services. A currency's value fluctuates as its supply and demand.

         Supply increase  and at the same time demand decrease for a currency so it can bring down the value of that currency and even falls drastically.

         Supply decrease and at the same time demand increase for a currency,  due to this price rise can be seen of that particular currency.

         Forex trading benefits are that you can buy or sell any currency pair, at any time subject to liquidity. So if you think the Eurozone is going to break apart, you can sell the Euro and buy the Dollar (sell EUR/USD). If you think the price of gold is going to go up, based on historical correlation patterns you can buy the Australian Dollar and sell the USD dollar (buy AUD/USD).

         This also means that there really is no such thing as a "bear market" in the traditional sense. You can make or even lose money when the market is trending up or down.

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