Types of Charts Used in Technical Analysis

by Panzer
Performing technical analysis without charts is like playing basketball without a basketball.
In this lesson, our goal is to introduce the most common types of charts technical analysts
use.
The first is the line chart.
Here is a 5-year line chart showing the development of the S&P500 from 2015 to 2019.
It’s quite straightforward to read.
The closing price of each trading day is connected by a line.
Hence, the name–line chart.
As we can see, there was sideways movement in the S&P 500 before it started increasing
steadily until 2018, when global political uncertainty caused stock prices to drop.
In the second half of 2018 and early 2019, the stock market recovered successfully.
This is a chart you can easily find by going to google and searching for “S&P 500”.
The next type of chart we’ll look at is a bar chart.
It is a bit more information-rich than a line chart.
A bar chart is composed of bars—no surprise there!
😊 Each bar provides three interesting pieces
of information: First, the highest and the lowest price of
a stock within a given trading day, Then, the opening and closing prices of that
day, And the volatility during the trading day.
The tiny lines sticking out on each side of the vertical bar are the opening and closing
prices, always reading from left to right.
The top and bottom of the bar represent the highest and lowest price of the stock.
The height of the vertical bar represents the volatility in the movement of the stock’s
price during the trading day.
In other words, the shorter the bar, the lower the volatility in the stock’s price.
Reversely, the longer the bar, the higher the volatility.
Another popular type of chart is the candlestick chart.
It was introduced in Japan centuries ago.
It provides information similar to a bar chart but tends to be easier to read, making it
simpler to count how many consecutive days of a stock’s price decrease or increase
have been observed.
The rectangular body is called the candle.
The top and bottom of the candle indicate a security’s opening and closing price for
a given trading day.
The tiny lines below and above the candle is called the wick.
It signifies the high and low price of the security during the trading day.
In days when the security closed higher than its opening price, the candle will be unshaded.
While days when the security closed lower than its opening price, the candle will be
shaded.