Stock Chart Types



For an investor who is interested in trading securities on either a short-term or long term basis, understanding the  purpose and use of stock charts is crucial

Investors and traders have been utilizing stock charts for a  long time, but recently they have become a more popular trading tool due to the fact that many online stock charting programs have become more widely available.

In this article we will take a look at not only stock chart types, but their  main features, as well as how they are utilized.

While some stock chart types are designed to track stocks on a day-to-day or weekly basis, other types of charts provide an overview of a stock’s trading history over the span of several years.

The easiest stock chart type is  the line chart, which shows the price of the security (typically at the close of the market). Candlestick or bar charts are more popular because they can show the stock’s price range from high to  low for each day, week or month.

The type of stock chart you use will depend on a variety of factors including your individual trading strategy, investment goals and time frame, as well as your personal preferences.

Here we will take a look at the 3 most commonly used stock chart types: candlestick charts, OHLC charts and line charts.

First, let us review candlestick charts.

Candlestick Charts

The candlestick chart chart is similar to a bar chart, but it differs in the way that it is constructed visually.  The candlestick is similar to a bar chart in that it also has a thin vertical line showing the trading range for a security over a set period. The difference between a candlestick chart and a bar chart comes in the formation of a wide bar on the  vertical line, which shows the difference between the opening price and the closing price.

A weekly candlestick chart of the Microsoft stock looks like this:

 

 

Candlestick chart patterns show us the stock’s price at the open, its low price, high price and closing price. Candlesticks can be used in any time period as shown below:

 

 

 

OHLC Charts

Next we have OHLC Charts. The OHLC part simply stands for open, high, low and close. They are also commonly referred to as bar charts.

OHLC charts are fairly similar to candlestick charts. I will show you a picture of a OHLC chart and you will probably understand how they work if you have mastered the candlestick chart. We will still look at the Microsoft stock.

 

If you need a more detailed look at what these bars mean, here goes:

 

Line Charts

Line charts are probably the easiest chart to understand. They simply connect past price points together. The software or website you use for charting will usually allow you to chart either the open, low, high or close prices for a stock.

Using the Microsoft weekly chart again, let’s see how it looks with the weekly close prices plotted on a line chart.

 

As you can see, a line chart can provide a nice smooth chart to make it nice and easy to pick out trends.

When analysing a particular stock, the type of chart you use is entirely down to personal preference. It can often be helpful to use more than one type of chart for your trading strategy.

If you are looking for a website for viewing stock charts, the one I often use is stockcharts.com.  Stockcharts.com allows you to screen for stocks based on a variety of criteria, as well as offers preset parameters with with to screen for potential investments.




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