Types of Charts

Types of Charts

There are as many types of Charts and ideas as there are chartist and profitable traders who make money from their squiggly lines on graph paper.

 

 Line Charts

lineThe simplest is the basic line chart which we see in the newspaper each day. Generally, these use only the closing price for the day, week or month as a representative sample of the time period being looked at. With daily charts, the closing price also carries increased significance as this is the settlement price which has to be paid at the end of each trading day for the parcel of shares or contracts.


Bar Charts bars - types of charts

The next extension is to add in the missing data. That is the opening price, and the period’s high and low. The high and low are linked with a line to show the daily range with a tag on the left to show where the market opened and a tag on the right to indicate the close. These bars can help build a much clearer picture of where the moods and temperament changes are taking place.


Candlestick Charts

candle - types of chartsBack in the 1700’s, there was a very successful trader in the rice markets of Japan who developed a system of drawing the day’s market action in a way similar to bars except that he added emphasis by closing in the range between the open and the closing prices. While he still included the range outside the open and the close, which he called shadows, he said that they had little significance.

To make the chart more visually useful he filled in the box of the body on days where the price closed lower than it opened (Down days) while leaving only the outline if the closing price was above the open. (Up days)

The real value of candlestick charting is that it makes moves very visual and both the rice traders and traders today still notice that certain configurations of candles generally lead to specific market action. Sometimes this means a continuation with increased vigor or a reversal of price. 

 


POint & figure chart - types of charts
 

Point & Figure Charts

Back in the 1900’s floor traders used to keep track of the price within markets by simply noting down every price change. They used graph paper with the prices market up the left side and simply filled in the price squares. They used an “X” for an up move and an “O” for a down move. If they couldn’t show the move within the column they were in, then they simply would move to the next column to the right and start again in the new direction.While this method is very good at showing particular trends in prices and areas of high probability for profit or loss, it doesn’t show gaps where the market didn’t actually trade. This can cause confusion. Point and Figure are, therefore, best used in conjunction with other charting methods.
You have learned about types of charts, now let’s study some chart patterns.

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