What are Stock Charts?
Chart patterns and Charting are fundamentals to technical analysis. A chart is a visual representation of data, in which the data is represented by symbols such as lines in a line chart, bars in a bar chart or candles in a candlestick chart.
By looking at E.C.G, a doctor can tell about the present status of the heart and can speculate the probable future of the heart. Like wise a stock chart tells us about the present trend of the stock market and the probable future of the stock. It is the document of mother market, who continuously tries to communicate us about what she might do in the immediate future.
A stock chart is a type of diagram or graph, that organizes and represents the stock market data and its qualitative analytical data. Charting and chart patterns are often used to ease the understanding of large quantities of data and the relationships between them.
It is said that a picture is worth 1000 words. Although I have friends who studies numbers and create their trading plans, I can neither understand nor remember the numbers. Remembering a picture or a chart pattern is much easier and areas of support and resistance are easily visible. Charts can usually be read more quickly than the raw data that they are produced from.
They can be created by hand on a graph paper or by computer using a charting software. Some old timers still prefers to update their charts by hand. They say updating their charts by hand makes them one with the market and helps them to stay with the market.
The charts can be of any time period. It may be in minutes of 5, 10, 15, 30, 60 etc; then we call it as 5 minute chart, 10 minute chart, etc; It may contain the data of one full trading session of the day which we call as a day chart. It may represent a longer trading period such as a week or a month or a year. Then they are called as a weekly chart, a monthly chart and a yearly chart respectively.
In olden times charts were drawn by hand by the trader. They were updating mostly day and weekly charts. Now with the computer we can create any time frame charts just by a few clicks, in a few seconds.
Study and understand how each type of stock chart is created and analysed. Charts most commonly used in technical analysis of stock market are Line Chart, Bar Chart, Candle Chart and Swing Charts.
A Bar Chart
A Candlestick Chart
What are different types of Stock Charts?
There are many 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.
- Bar chartBar 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.
- Candle chart
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.
- Candlevolume chartCandlevolume 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.
- Equivolume chartEquivolume Charts display the relationship between price and volume in a bar. 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, and they differ from bar charts by not considering time factor.
- Kagi chartKagi Charts differs from traditional stock charts, such as the Candlestick chart by being independent of time and volume.
- Line chartLine 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.
- Point and figure chartPoint 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.
- Renko chartJust 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.
- Swing chartSwing 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.
- Three line break chartThree 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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