Chart types

Line Charts

Line charts are the most basic type of chart because it represents only the closing prices over a set period. The line is formed by connecting the closing prices for each period over the timeframe. While this type of chart doesn’t provide much insight into intraday price movements, many investors consider the closing price to be more important than the open, high, or low price within a given period. These charts also make it easier to spot trends since there’s less ‘noise’ happening compared to other chart types.

Bar Charts

Bar charts expand upon the line chart by adding the open, high, low, and close – or the daily price range, in other words – to the mix. The chart is made up of a series of vertical lines that represent the price range for a given period with a horizontal dash on each side that represents the open and closing prices. The opening price is the horizontal dash on the left side of the horizontal line and the closing price is located on the right side of the line. If the opening price is lower than the closing price, the line is often shaded green to represent a rising period. The opposite is true for a falling period, which is represented by a red shade.

Candle sticks

Candlestick charts were developed by Japanese rice merchants to track the price action of rice futures in the 1700s. Japanese candlesticks were first introduced to the United States through a book titled “Japanese Candlestick Charting Techniques” by Steve Nissan in 1991. The candlestick chart has become standard on almost all platforms and is the most popular style of chart used by traders. The chart utilizes the opening, high, low and closing price data per specified time interval to generate a candlestick, which is plotted on a price chart.

The candlestick is composed of three parts: the body, the upper tail and lower tail. Tails are also known as wicks (shadow). The body is composed of the opening price and closing price for the time interval also known as the period. The body is colored either green or red. A green candle indicates the closing price was higher than the opening price, which is considered bullish since the net result is price rise.

A red candle indicates that the closing price is lower than the opening price, resulting in a net price drop, which is bearish. The upper and lower tails are two thin lines extending from the top and bottom of the body towards the highest price and lowest price for the period. Traders often search for specific candlestick pattern formations to generate trade signals