There are several types of charts in the stock market and forex market that investors use. However, I talk only about three of them.
First, what is a chart?
A chart in the financial market is simply the price behavior of an asset, displayed in different ways. They are tools that represent the summary of price behaviors in a blink of an eye and updating consistently.
Charts are infrastructures of financial markets. Every investor needs them to see the picture of actions and reactions in the market.
There are many types of charts, such as bars, candles, areas, lines, points & figures, Heikin Ashi, Kagi, Renko, etc. However, three of them are most popular and they are lines, bars, and candlesticks.
This article explains the three common ways you can see your charts in the financial market.
1. Line Chart
The line chart shows the market price by connecting closing points of a period (timeframe) such as hourly, monthly, or weekly.
In this chart, you see a line moving like a wave. Generally, traders use it for studying for long periods due to requiring little space.
2. Bar Chart
The Bar chart shows a graph in dry rigid wood shapes that each bar has two leafstalks.
The bullish bar has one color, and the bearish bar has another color. You can set the color as you wish.
The bullish bar starts with lower leafstalks and ends with upper leafstalks. The top point of the bar shows the highest price, and the bottom of the bar shows the lowest price in the timeframe. From the lowest to the highest points of the bar is the range price of the day (or a bar).
3. Candlestick Chart
The candlestick chart is one of the most popular types of chart in the stock market and shows the chart in candlestick shapes.
Candlestick charts are the most widely used chart by investors. It somehow looks like a bar chart but is more beautiful.
Every candlestick has a body and two tails, an upper tail, and a lower tail. The tail is also known as the shadow.
Traders set bull candles in one color and bear candles in another for the chart to look nicer. In the west, traders prefer to set green for the bull candle and red for the bear candle.
In a bull candle, the price starts from the lower point of the body and ends at the upper point of the candle’s body. The highest and lowest points of a tail show the highest and lowest price of the range, respectively.
In a bear candle, the price starts from the higher point of the body and ends at the lower point of the candle’s body. Like a bull candle, the highest point of the upper tail is the highest price in a session (ex: one hour) and the lowest point of the lower tail is the lowest price of the session.
Moreover, candlesticks create patterns that suggest future price movements.
Bottom Line
There are several types of charts but you need only line and candlestick charts. These two charts are easier to understand and helpful in the recognition of chart patterns.
