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CHARTS FOR TECHNICAL ANALYSYS

Line Chart
Line chart image

8 TYPES OF CHARTS WHICH HELPS FOR TECHNICAL ANALYSIS.

Below are the 8 types of charts that help for technical analysis for newcomers into the share market. Basic about all chart is, X-axis displays the stock price or volume of trade, and Y-axis shows the time period. There are mainly 8 charts commonly used by traders for technical analysis. However, the 2 types of charts that are the most commonly used and easy to understand, are the line chart, and candlestick chart.



 1. LINE CHART

 The line chart is the most basic type of chart used in the share market. It is a graphical representation of the current market price on the X-axis against the time on the Y-axis. It is formed by connecting the series of data points ( Market price) with a continuous line.

Line Chart

Line chart image

  • Each point in the chart indicate the current price at that particular
  • Line chart helps to locate easily major support and resistance levels in the price movements.
  • Line chart helps us to draw trend lines and easy to understand and follow for newcomers.
  • Building strategies using a line chart is difficult as it does not provide accurate details like open, high, and low prices for a particular time frame.

 2. CANDLESTICK CHART

A candlestick chart describes price movements of a security and derivative over a time period. Candlestick is also called the Japanese candlestick chart. Candlestick shows the opening, closing, and high and low in a particular trade time frame I.e. 5 minutes, one day, or one-month… If it is a 1-month chart, it shows about 20 trading days as each of 20 candlesticks in the chart.

candlestick chart

candlestick chart

  • If the chart is green, it shows bullish ( Price goes up in a particular time frame) else bearish trend.
  • For a bullish candle, the left bottom corner point of the body is the opening price and the right top corner is the closing price. For a bearish opening, price indicates on the left top corner and closing on the right bottom corner of the body.
  • The highest point of the candlestick indicates the high price and the lower endpoint of the bottom stick of the candle indicates the lower price in the selected time frame.
  1. BAR CHART

 Bar charts are one of the easy charts to follow which consist of an opening foot, which facing left of the central vertical line, a vertical line at center showing high and low in a time frame, and a closing foot, which facing right of the vertical line. A bar chart shows the high, low, open, and close prices for a defined period of time and it can be colored coded.

Bar charts

Bar charts

  • The vertical line in the middle of the price bar represents the high price and low prices for a particular period.
  • The left horizontal lines which called opening feet which indicate the opening price in the time frame.
  • The right horizontal lines which called closing foot represent the closing
  1. COLOURED BAR CHART

 Coloured Bar charts Similar to Candlestick chart which consist of the body showing the opening point and closing point and central vertical line showing high and low for a specified time. The difference is each candle will be coloured in a different colour which indicated below.

Coloured Bar charts

Coloured Bar charts

  • The red candle bar indicates a downtrend for a particular time period.
  • A green candle bar indicates an uptrend for a particular time period.
  • White candle bar indicates open and close price almost the same within a particular time period.  
  1. HOLLOW CANDLESTICKS

 Hollow candlestick is similar to Candlestick chart which consists of the body showing the opening point and closing point and central vertical line showing high and low for a specified time and hollow and fills indicate the movement of the price as below.

Hollow candlestick

Hollow candlestick

  • The hollow candlesticks indicate price moved higher after its open (Bullish).
  • A filled candlestick indicates that the price moved lower after the open (Bearish).
  • The black-filled candlestick is the opposite of a normal hollow candlestick, which indicates, even though the closing price was above the previous closing price, current prices moved lower after the opening price in a stipulated time frame.
  1. MOUNTAIN CHARTS

Mountain charts, also known as area charts, which is similar to the line chart. The only difference is space under the line chart is shaded. They line chart and the mountain chart look exactly the same. The peaks and dips in the chart make it look like a mountain.

Mountain charts

Mountain charts

  • Mountain charts are useful to quickly grasp pricing position information over a long period of time frame.
  1. BASELINE CANDLES

Baseline candles are a combination of candle chart and mountain chart with a base reference a strength line from left to right. The baseline is set to indicate the opening price of the market day.

Baseline candles

Baseline candles

  • The portion above the baseline indicates bullish and below is bearish.
  • When the open is lower than the close(Bullish), the area below the candles up to the baseline is shaded green.
  • When the open is higher than the close (Bearish), the area above the candle,  up to the base line is shaded in red.
  1. VOLUME CANDLESTICK

Volume candlestick is similar to a candlestick with the additional feature of volume representation in it. Volume is represented on the base of the width of each candle. In Volume candlestick, chart trade volume is plotted at the bottom of the chart as rectangles. The height of each rectangle represents the volume.

Volume candlestick

Volume candlestick

  • If the trading volume is higher, wider will be the candlestick body.
  • Low-volume days result in skinny candlesticks.
  • A red volume bar indicated bearishly and a green bar indicate bullishly.

Conclusion:

All the above 8 charts are essential to understand for the newcomers to the share market. In technical analysis these charts moke a big role to understand the performance of the stock for a stipulated time frame.  This technical analysis will help the investors and traders to take a decision on the entry position of each stock.

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Harry
Harry J P is a Business development and sales professional passionate about sharing knowledge in the domain of sales, and personal finance which helps in Personal financial learning for newbie earners. This blog came out of the experiences in the domain of personal finance, business development, and the share market.

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