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Stock charts graphically depict the fluctuations of stock prices and trade volume. Charts play a pivotal role in the technical analysis process and also technical analysts use stock charts to display their analysis of stock prices movement overall. The purpose of stock charts is to showcase a simple graphical representation of stock price movement over a certain period of time. It also highlights about stock’s price over a period of time whether it’s high, low or medium in trading. The time frame usually used for creating stock charts: interday, daily, weekly, monthly, quarterly, half-yearly and annually that represents data.
Types of Stock Charts
Although there are different chart methods available, these are the four most popular methods of displaying stock prices namely:
- Line charts – It is normally used to represent closing stock prices rather than open, high or low data over a specific period of time.
- Bar charts – It usually represents price on the y-axis and time on the x-axis. The vertical bar displays the highs and lows in stock prices movement. The horizontal lines touch the vertical bars represent both closing and opening prices altogether over a specific period of time.
- Candlestick charts - This chart is originated from Japan over300 years ago. Candlestick charts require the open, close, high and low prices to showcase the analysis. When the closing price is greater than the opening price, the candle portion will be blank or colored and black candlesticks will be formed when the closing price is lower than the opening price.
- Point and figure charts -These charts represent only stock prices movement not time. It comprises of ‘Xs’ and ‘Os’. X represent when the price is higher than the upper limit and O represent when the price is lower than the upper limit.
Conclusions
Thus, there are several charting techniques available in the market today. But there is a fact that one technique is not always better than the other techniques. The choice of choosing charting methods will depend on technical analyst’s personal opinion, preference and experience altogether.
Finally, each charting technique will have its own style of representing data, interpretation, advantages and its drawbacks. So, key here is analyst’s analysis and representation of analysis by means of choosing right available charting technique overall. |
