Chart Types

Introduction • 5 min read • Beginner

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Imagine you're trying to understand the story of a market—how prices have moved, where they might go next. To do this, traders and investors rely on visual tools called charts. These charts are like different lenses through which you can view the market's activity, each offering a unique perspective. Let's explore the most common types.

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1. Line Chart

The simplest of all, the line chart connects a series of data points, usually the closing prices over a period. It's like drawing a connect-the-dots picture of how an asset ended each day, week, or hour.

What it shows: A clear, easy-to-read overview of price trends.

The general direction of the market over time.

When to use it: When you want a quick glance at long-term trends without much detail.

For a clean, uncluttered view of price movement.

Line Chart

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2. Bar Chart

A bar chart, sometimes called an "OHLC" chart (Open, High, Low, Close), gives you more information than a line chart. Each vertical bar represents a specific period (e.g., one day, one hour) and tells a mini-story about what happened during that time.

What it shows: High: The top of the vertical bar indicates the highest price reached.

Low: The bottom of the vertical bar indicates the lowest price reached.

Open: A small horizontal line to the left of the bar shows the opening price.

Close: A small horizontal line to the right of the bar shows the closing price.

When to use it: When you need more detail than a line chart, but still prefer a clean look.

To see the price range and opening/closing levels for each period.

Bar Chart Bar Explanation

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3. Candlestick Chart

The candlestick chart is perhaps the most popular and visually rich chart type, especially among day traders. Originating in Japan, each "candlestick" provides the same OHLC information as a bar chart, but in a more graphical and intuitive way.

What it shows: The "Body": The thick part of the candlestick shows the range between the opening and closing prices.

If the close is higher than the open, the body is often colored green (or white/hollow). This is a bullish candle.

If the close is lower than the open, the body is often colored red (or black/filled). This is a bearish candle.

The "Wicks" or "Shadows": The thin lines extending above and below the body represent the high and low prices for the period.

When to use it: For in-depth analysis of price action and market sentiment.

To identify specific candlestick patterns that can signal reversals or continuations.

When you want to quickly grasp the relationship between open, high, low, and close prices. Candlestick Chart Candlestick Explanation

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More Advanced Chart Types

While line, bar, and candlestick charts are the most common, some traders use specialized charts that filter out time and focus purely on price action. These charts can help reduce market "noise" and highlight key trends.

Point and Figure Chart

A Point and Figure chart is unique because it completely ignores time. It's built exclusively on price changes of a specific size. The chart uses a series of X's to represent rising prices and O's for falling prices. A new column is only created when the price reverses by a set amount, making it excellent for identifying clear support and resistance levels.

Renko Chart

Originating in Japan, Renko charts are similar to Point and Figure charts in that they ignore time. The word "Renko" comes from the Japanese word for "brick." A new brick is drawn only when the price moves by a predefined amount in a single direction. This creates a chart that looks clean and makes identifying trends easier, as bricks of the same color appear in long chains.

Footprint Chart

A Footprint chart is an advanced analytical tool that provides a detailed look at trading volume at each price level within a single bar or candlestick. It's like a transparent candlestick, showing you exactly where trading activity occurred.

Key Elements:

Volume on each price level: Shows how much was traded at a specific price.

Split between buys and sells: Reveals the market's aggression, showing whether buyers or sellers were dominant at a particular price.

Delta: The difference between buying and selling volume, which can be a powerful indicator of momentum.

These advanced charts are less common and require specialized software and a deeper level of study to be used effectively.

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