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Types Of Chart

The chart is a graphical representation of series of prices of a stock or any security. Charts are the key tools used in a Technical Analysis. Charts are useful to know the trends of a market, charts are analyzed to identify various types of opportunities to invest or to initiate a trade. So in charts, there are many types that get differentiated by their visual representation.

So there are three primary types of charts used by traders or investors, depending upon the type of information they are trying to seek and what their desired goals are.

  1. Candlestick Chart

  2. line chart

  3. Bar chart



CANDLESTICK CHART



Candlestick charts originated over 300 years ago in Japan. Candlestick chart is very popular among traders and investors.

The Candlestick chart has a thin vertical line that shows the price range as per the selected timeframe. The area between the opening price and the closing price is known as Real Body. The thin lines above and below the real body are known as Wick. Wick represents the highest and the lowest traded prices of a stock or any security, and the body represents the opening and the closing price.



If the price closes above its opening price that candle becomes a green candle. If the price closes below its opening price then a candle becomes a Red candle. If the price closes on its opening price ( opening price = closing price ) it will not form a body, this kind of candle is known as a DOJI candle. However, there are many types of candlesticks in the Candlestick chart.



LINE CHART



The line chart is the most basic type of chart because it represents only the closing prices over a selected period timeframe. The line-in-line chart is formed by connecting the closing prices for each selected timeframe i.e. Day to day or hour to hour or minute to minute depending upon which timeframe you are using either it can be daily or hourly or it can be 15 or 5 minutes. However, it is not much useful for intraday traders, because it does not provide any detailed information about the price movement.


Basically, the line charts make it easier to spot the trends, since there is less noise compared to other types of charts. In a line chart, if the line is steadily progressing upwards, the stock is consistently increasing in price. On the other hand, if the line is heading downward, the price is gradually going down. Zigzag line formation indicates the volatility in the particular stock or security.



BAR CHART



A bar chart is an expanded form of a line chart by adding opening price, closing price, highest & lowest price in it. A bar chart is made up of a series of vertical lines with a horizontal dash on each side which represents the opening and the closing price. The Highest and the lowest points of a thin vertical line represent the highest and the lowest traded prices.



The opening price is a horizontal dash on a left side of a vertical line and a closing price is a horizontal dash on a right side of a vertical line. A bar chart is similar to the candlestick chart, the only difference is that the body of a bar chart is not filled like that of a candlestick chart.


So these are the basic types of charts used by the traders and the investors, While it takes a little patience to learn how to read a chart but once you learn the basics you will have a better understanding of how to read the price action for that time period.

Thank you!


 

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