CHARTS
The foundation of technical analysis is the chart. In this case, a picture truly worth a thousand words.
TYPES OF CHARTS
Line Charts
A line charts is the simplest type of chart. A line chart’s strength comes from its simplicity. It provides an uncluttered, easy to understand view of a product’s price. Line charts are typically displayed using a product’s closing prices.
Bar Charts
A bar chart displays a product’s open, high, low and closing prices. The top
of each vertical bar represents the highest price that the security traded during the period, and the bottom of the bar represents the lowest price that it traded. Opening and closing prices are represented by horizontal marks to the left and right of the vertical bar respectively. These charts are constructed by representing intraday, daily, weekly or monthly activity as vertical bar.Candlestick Charts
Candlestick charts display the open, high, low and closing prices in a forma
t similar to a modern-day bar chart, but in a manner that extenuates the relationship between the opening and closing prices. Candlestick charts are simply a new way of looking at prices, they do not involve any calculations.
t similar to a modern-day bar chart, but in a manner that extenuates the relationship between the opening and closing prices. Candlestick charts are simply a new way of looking at prices, they do not involve any calculations. The rectangle making up the 'candlestick' is called the body. A white (or, just as often, green/blue) body indicates a closing price higher than the opening price. A black (or red) price indicates a closing price lower than the opening price. The lines protruding top and bottom from the body indicate the high and low prices at the tips.
Some candlesticks will have no line (or shadow as it is sometimes called) protruding from the top of body. That indicates that the currency closed at its high. Similarly, there may be no line protruding from the bottom. Such information is helpful in judging trends.
The length of the body, just as does the length of the bar in a bar chart, give a visual indication of the range of prices for that period. That is a visual measure of the volatility of prices, a very important factor in trading.
Candlesticks will form patterns as they are charted over time. Those patterns aid investors in making trading decisions. Those patterns have colorful names, such as the Hammer, the Hanging Man, the Morning Star and others. But though the names are fanciful, the purpose is serious: to help detect and predict trends.
Some candlesticks will have no line (or shadow as it is sometimes called) protruding from the top of body. That indicates that the currency closed at its high. Similarly, there may be no line protruding from the bottom. Such information is helpful in judging trends.
The length of the body, just as does the length of the bar in a bar chart, give a visual indication of the range of prices for that period. That is a visual measure of the volatility of prices, a very important factor in trading.
Candlesticks will form patterns as they are charted over time. Those patterns aid investors in making trading decisions. Those patterns have colorful names, such as the Hammer, the Hanging Man, the Morning Star and others. But though the names are fanciful, the purpose is serious: to help detect and predict trends.