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Types of Chart
1. Introduction
A chart is a graphical representation
of price movement over a specific period of time and is composed of an x-axis
(time) and a y-axis (price). The choice of the time frame employed depends on
the user's need. It is obvious that an intra-day scenario will not be based on a
monthly chart.
2. Line Chart
A line chart shows a line connecting
the "closing prices". The closing is the last price recorded at the end of a
specific period of time (session).
3. Bar Chart
Bar chart: Basically all
characteristics mentioned for the line chart also hold true for the bar chart.
However, the construction is a
different one. The bar chart is composed of a high (highest price during a
session), a low (lowest price during a session) and the close. All that is
required is to draw a vertical line (bar) from the high to the low. Then, set a
horizontal dot from the vertical line to the right, representing the close.
Sometimes users refer also to the opening price; a dot drawn on the left side of
the bar. The bar chart is probably the most popular chart in use today.
4. Candlestick Chart
The building blocks for the
candlestick chart are the high, the low, the opening and the closing.
The difference to the bar chart is
that the open and the close form the cornerstones for the, so called, real body.
The body is white if the closing is higher than the opening. The contrary is
true for the black body. The candlestick charting technique is an ancient
Japanese invention dating from the late 18th century. The theory tries to unveil
trend reversal or continuation signals. Various tools of analysis (moving
average, RSI, trend-lines etc.) can be applied in combination with the
candlesticks.
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