What Are The Different Chart Types Used in Trading & Investing?
Updated: Aug 30, 2021
A good trading strategy will give steady success, life-changing income, especially if a trader can execute it without taking more risk in one trade.
The technical analysis supports a diverse variety of charts, and many good trading strategies are using various charts.
As most traders know, charts are graphical displays of the price information of securities over time. They offer immense help to technical analysts to decide the Entry and Exit points and Stop Loss.
It is better to know the various varieties of charts used in stock market trading. Below are some of the essential chart types.
A line chart is the simplest form of chart and is formed by connecting the closing prices for each period over the selected time frame.
It will not contain open, high, or low values of the selected period, and typically, investors use this chart to spot a trend.
Bar chart or OHLC chart
A bar chart is made up of a series of vertical lines representing the price range for a given period, with horizontal dashes on each side that represent the open and close prices. It is also recognized as the OHLC chart as it indicates open, high, low, and close.
The opening price is the horizontal dash on the left, and the horizontal dash on the right represents the closing price.
In some software, the color of the entire bar is constant. However, in some cases, the bar's color is green when the closing price is above the open price, and the color of the bar will be red when the closing price is below the open price.
Candlestick charts are the most popular chart patterns among traders. They are invented in Japan over 300 years ago.
A chart with open, high, low, and close data in the form of a candle is a candlestick chart.
Both the bar and candlestick charts provide the same data. However, the candlestick chart is easier to read and more visually appealing.
Rising time periods (when the closing price is greater than the opening price) will have hollow bodies.
Block candlestick bodies represent falling periods (when the closing price is less than the opening price).
Nowadays, every software represents bullish candlesticks with green bodies and bearish candlesticks with red bodies.