Equivolume Charts

What are Equivolume Charts?

They are stock charts used in charting and study of chart patterns in technical analysis. They display the relationship between price and volume in a bar.

In technical analysis of stocks price range that is highest price and the lowest price reached during the time period is important in analyzing the swings. Volume helps to analyze the weight of the price movement and it helps to analyze supply and demand of the stock.

In these charts price range and volume are combined to form rectangular bodies. They do not contain open and close price data.


History

These Charts are developed by Richard W. Arms, Jr., and explained in his book Volume Cycles In The Stock Market: Market Timing Through Equivolume Charting. They presents a highly informative picture of market activity for stocks, futures, and indices. They differ from candlesticks by not considering open and close prices. So they do not have wicks as in candlesticks. They differ from bar charts by not considering time factor in x-axis. While both bars and candlesticks do not have volume data in them.


How are Equivolume charts constructed?

In these charts, the more important volume is combined with the price range and depicted as rectangular boxes. The height of the box represents the range of the price movements. The top line of the box represents the highest price reached in that time period and the bottom line of the box represents the lowest price reached in that time period. While the width of the box represents the volume.

The resulting charts represent an important deviation from all other analytical methods, in that time becomes less important than volume in analyzing price moves. It suggests that each movement is a function of the number of shares or contracts changing hands rather than the amount of time elapsed.

Perhaps this charting method is best summed up by the developer himself as follows: "If the market wore a wrist watch, it would be divided into shares, not hours.”


Study the chart given below and compare it with the bar chart.

Equivolume Chart for technical analysis of stocks

See how the width of each bar widens as the volume increases. The x-axis widens as the volume increases.

Also observe there are no wicks as in candlesticks.


Study the bar chart given below.

Bar chart for technical analysis of stocks

The bars show high and low prices as well as open and close prices. The x-axis proportionately depicts the time value.

Both the charts given above belong to the same stock and time frame. 




Click here to buy the book: Volume Cycles In The Stock Market: Market Timing Through Equivolume Charting



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Related Readings

    There are many other types of charts used in stock analysis. You may click on the name of each chart listed below to learn and understand more about them.

  1. Bar chart
  2. Bar charts also called as OHLC charts or open-high-low-close charts. They are used in charting and study of chart patterns in technical analysis. Each bar is a symbol created by connecting a series of price points, typically used to illustrate movements in the price of a financial instrument.

  3. Candle chart
  4. Candle chart or simply candlesticks charting is an ancient Japanese method of technical analysis. Candlesticks dramatically illustrate supply and demand concepts defined by classical technical analysis theories. Candlestick patterns not only display the absolute values of the open, high, low, and closing price for a given period in a format similar to the modern day, bar chart. But they also indicate trend continuation and trend reversal more clearly and more precisely.

  5. Candlevolume chart
  6. Candlevolume Chart combine the features of Equivolume charts and Candlestick charts. These charts have the wicks or tails and filled/unfilled body features of Candlestick charts, as well as the volume-based body width of Equivolume charts. This combination gives us the unique ability to study Candlestick patterns in combination with their volume.

  7. Kagi chart
  8. Kagi Charts differs from traditional stock charts, such as the Candlestick chart by being independent of time and volume.

  9. Line chart
  10. Line charts are created by connecting a series of data points together to form a line. This is the basic type of chart common in many fields.

  11. Point and figure chart
  12. Point and Figure charts just like in Kagi charts, disregard the passage of time and the chart changes only when the price changes. Rather than having price on the y-axis and time on the x-axis, these charts display price changes on both axis.

  13. Renko chart
  14. Just like in Kagi chart & Point and Figure chart, Renko charts also disregard the time factor in X axis. These charts are similar to Three Line Break charts except that a brick (or a line) is drawn in the direction of the prior move only if a fixed amount of the box size has been exceeded. The bricks are always of equal in size.

  15. Swing chart
  16. Swing charts are also called as Gann charts because their construction is based on W.D.Gann's method of trading. These charts disregard time factor and does not consider opening and closing prices.

  17. Three line break chart
    Three Line Break Charts originates from Japan and gets its name from the default number of line blocks typically used. They use an up block (line), a down block (line) and a reversal block (line). These charts disregards the time factor, which is usually plotted on the X axis, in commonly used stock charts.





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