Charts
Charts are often divided into different “time scales” allowing traders to see chart patterns that cover different periods of time. Obviously various types of traders use different types of time frames in order to come to their conclusions about future price movement. For example a trader that prefers to open trades over short periods of time (day trading), would rather use smaller time frames than an investor who likes to keep positions open for months on end.
There are several types of charts that can be used in order to make decisions when technical trading:
1) Line chart – A simple line that connects the closing prices of a specific time period. When looking at a line chart we can determine the current direction of the security. Line chart analysis is the simplest way of analyzing charts due to the lack of information that a technical trader can receive from it.
Example: The Following chart is a line chart of Microsoft.
*courtesy of stockcharts.com
2) Bar chart- A more complex adaptation of the line chart, a bar chart consists of numerous bars across a time period. Each bar shows detailed information of the price movement giving the trader information of the opening price, closing price, highest price and the lowest price.
Bar charts are also known as “OHLC charts”, as they indicate the Open, High, Low and the Close for that particular security.
