A Typical Line Chart
A line chart is the most basic and simplest type of stock charts that are used in technical analysis. The line chart is also called a close-only chart as it plots the closing price of the underlying security, with a line connecting the dots formed by the close price. In a line chart the price data for the underlying security is plotted on a graph with the time plotted from left to right along the horizontal axis, or the x-axis and price levels plotted from the bottom up along the vertical axis, or the y-axis. The price data used in line charts is usually the close price of the underlying security. The uncluttered simplicity of the line chart is its greatest strength as it provides a clean, easily recognizable, visual display of the price movement. This makes it an ideal tool for use in identifying the dominant support and resistance levels, trend lines, and certain chart patterns.
However, the line chart does not indicate the highs and lows and, hence, they do not indicate the price range for the session. Despite this, line charts were the charting technique favored by Charles Dow who was only interested in the level at which the price closed. This, Dow felt, is the most important price data of the session or trading period as it determined that period's unrealized profit or loss.
Line charts or close-only charts are still favored by numerous traders who agree the closing price is the most important data and are not concerned with the noise created price spikes and minor price movements, or the speculation that characterizes the start of the trading session.
The following is a chart of the EUR/USD with a 15-minute time frame.
A Line chart of the Euro/USD
OHLC Bar Charts
>Bar charts consist of bars, which are vertical lines with the bottom representing the low price (L) of the time-frame and the top representing the high price (H). The bars also have a horizontal dash on the right side of the bar to indicate the close price (C) for the time frame and some have a horizontal dash on the left side to indicate the open price (O).
However, not all bar charts use a horizontal dash on the left side to indicate the open price. When the open price is indicated, the bar is called a OHLC chart as it plots the open, high, low and close; when the bar chart ...
Candlestick charts have become popular in the West since the 1980s but they date back from the 1700s. The evolution of candlestick charts are generally attributed to the trading principles of a Japanese rice trader named Munehisa Homma who traded rice in 18th century Japan.
In candlestick charts plot the open price and the close price for the period to form the solid body of the candlestick. The high price and the low price are plotted as the upper and lower shadow, respectively. In this respect, they display the same information as OHLC bar ...