Type Of Technical Analysis ChartsThe basic tool in technical analysis is movement of prices,measured by charts.Due to it many times a person who is involved in technical analysis is called as “chartist”.
The basic three main type of charts used in it are :
3)Point and figure chart
These are simple graphs drawn by plotting the closing price of the stock on a given day and connecting the points thus plotted over a period of time.This charting pattern is the most basic type of charting used in finance and it is generally created by connecting a series of past prices together with a line.The charts are easily drawn and widely used.The price is marked on the Y – axis and the period of time on the X- axis.Line charts are helpful in identifying price patterns.
Bar charts :
They are also called as OHLC charts.It plots the span between the high and low prices of a trading period .In order to draw a bar chart, the the data on a day’s high,low and closing prices is necessary.The visual representation of price activity over a given period of time is used to spot trends and patterns. To plot a stock’s price movement,the high and low reached on a said day is marked and conected by a vertical line.The closing price is indicated by a small horizontal tick line on this line.
Point and figure chart
It is not used very commonly but it differs from the others in concept and construction.While the line and bar charts are plotted at specific time intervals,the PFC charts not have a time dimension.A PFC concern only with the measures of prices.In prices also it doesn’t measure all the movements.PFC records only those changes in prices which are larger than a specific amount called points.This charting pattern has been designed for long-term investment,point and figure (P&F) charts have been described as one of the simplest systems for better determining solid entry and exit points in stock market
Day trading charts or daily charts
It is a line graph that displays the intraday movements of a given security. Daily data is made up of intraday data that has been compressed to show each day as a single data point, or period.It displays all of the price movement for the period and are typically used by day traders to implement short-term strategies.Traders mainly concentrate on charts made up of daily and intraday data to forecast short-term price movements.
Renko charts : Based on only price movement this charting pattern doesn’t consider time and volume.It is constructed by placing a brick in the next column once the price surpasses the top or bottom of the previous brick by a predefined amount. White bricks are used when the direction of the trend is up, while black bricks are used when the trend is down.It’s also important to note that Renko charts may not change for several time periods. Prices have to rise or fall “significantly” in order for bricks to be added.
Kagi charts look similar to swing charts and do not have a time axis.An entry signal is triggered when the vertical line changes from thin to thick and is not reversed until the thick line changes back to thin. The direction of the chart changes when the price rises or falls by a certain percentage For eg if there is a upward movement of 5 % chart will begins to move upward changing its previous position and vice versa.
Candlestick Chart :
It is a mix of line-chart and a bar-chart, in that each bar represents the range of price movement over a given time interval.Each candlestick includes the open, high, low, and close, of the timeframe, and also shows the direction and the range of the timeframe. It is most often used intechnical analysis of equity and currency price patterns.