4 MAJOR TYPES OF TECHNICAL ANALYSIS CHARTS

 

There are four major types of Charts:

 

1) Line Chart

A line chart represents the daily closing prices of financial securities. It is used for the observation of long-term trends but also to make comparisons with related financial variables. For example, observe the price of an oil company compared to the price of oil during a particular period.

 

2) Bar Chart

A bar chart is commonly used for the observation of short-term and mid-term price movements. It incorporates opening, closing, and high and low prices daily. The left dash represents the opening price, the right dash represents the closing price -while the upper edge of each bar represents the daily high and the lower edge represents the daily lows.

If the left dash (open) is lower than the right dash (close) then the bar will be colored black. If the left dash (open) is higher than the right dash (close) then the bar will be colored red or white. In simple words, black bars represent upward closing prices, and red (or white) bars downward closing prices.

3) Candlestick Chart

Candlestick charts are of Japanese origin and are widely used in the Forex market. A candlestick chart is a combination of a line chart and a bar chart. Each bar represents the full range of a financial security price movement over a given period. Similar to the bar chart, the candlestick also has a thin vertical line showing the trading range.

 

 

4) Point and Figure Chart

Point and Figure Charts represent price movements and are not as concerned about time and volume activity. A Point and Figure Chart includes Xs and Os. The Xs represent upward price movements and the Os represent downward price movements. There are also numbers and letters in this type of chart, representing time (months).

In the graph below the 4 types of charts are presented (Line, Bar, Candlestick, and Point and Figure Chart.).

Three (3) Charting Indicators

Here are the three most commonly used chart indicators:

1) Resistance Point –It is above the current price and it signifies the price level that may prompt an increase in selling activity.

2) Support Point -It is below the current price and it signifies the price level that may prompt an increase in buying activity.

3) Breakout Point -The point whereby a price movement breaks support or resistance levels. At the point of a breakout price volume activity -and after the current trend is strengthened.

 

 

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