Types of Chart

Introduction

 Firstly, After determining that the Open (O), High (H), Low (L), and Close (C) are the best ways to describe the trading action for the given period, we require a charting technique that displays this information most understandably. Charts can become fairly complex if a quality charting technique is not used. Each trading day has four data points, namely the OHLC. A 10-day chart requires the visualization of 40 data points (1 day x 4 data points per day). You can imagine how difficult it would be to show 6 months or a year’s worth of data.

 Secondly, As you may expect,  standard charts such as the column chart, pie chart, area chart, and so on are ineffective for technical analysis. The line chart is the sole exception.
 
Thirdly, Regular charts do not function since they only show one data point at a given time. Technical Analysis, on the other hand, requires four data points to be display at the same time.
 
The following are some examples of chart types:
 
First, the Line chart
 
Second, Bar chart
 
Third, Japanese Candlestick
 

Furthermore, The focus of this section will be on Japanese Candlesticks; but, before we get there, we’ll learn why we don’t apply line and bar charts.

The Line and Bar chart
 
Importantly, The line chart is the simplest basic chart type, with only one data point used to create the chart. A line chart is create in technical analysis by plotting the closing prices of a stock or an index. Each closing price represents a dot, and a line connects the dots.
 
Undoubtedly, If we are looking at 60-day data, a line chart is create connecting the dots of the closing prices for 60 days.
 
Especially, Line charts can be produce for a variety of time frames, including monthly, weekly, and hourly. If you want to create a weekly line chart, you can utilize weekly closing prices of securities as well as other time frames.
 
Surely, The simplicity of the line chart is its advantage. The trader can identify the whole security trend with a single glance. However, the simplicity of the line chart is also a disadvantage. The line chart provides no further information to analysts other than a general perspective of the trend. Furthermore, the line chart considers only the closing prices, omitting the open, high, and low values. As a result, traders prefer not to utilize line charts.
 
The bar chart, on the other hand, is more adaptable. A bar chart shows each of the four price variables: open, high, low, and close. A bar made up of three parts.
 
The Central Line:-The top of the bar indicates the highest price the security has reached. The bottom end of the bar indicates the lowest price for the same period.
 
The left mark/tick:-Indicates the open.
 
The right mark/tick:-Indicates the close
 
For example
 
Open – 70
 
High – 75
 
Low – 65
 
Close – 74
 
For the above data, the bar chart would look like this:
 
As you can see, we can plot four different price points in a single bar. If you want to see a 5-day chart, we will see 5 vertical bars, as you could expect. So forth and so on.
 
The left and right marks on the bar chart change based on how the market has moved throughout the day.
 
If the left mark, which represents the initial price, is lower than the right mark, it means that the close is higher than the open (close > open), indicating that the markets had a positive day. Consider the following: O = 51, H = 56, L = 51, C = 56. The bar is color blue to signify that it is a bullish day  
 
Similarly, if the left mark is higher than the right mark, the close is lower than the open (close open), indicating a bad day for markets. Consider the following: O = 79, H=81, L=74, C=75. The bar is color red to show that it is a bearish day.
 
Importantly, The length of the central line represents the day’s range. The difference between the high and low can be characterize as a range. The longer the line, the bigger the range; the shorter the line, the smaller the range.
 
However, Even though the bar chart displays all four data points, it lacks visual attractiveness. This is most likely the most significant disadvantage of a bar chart. When looking at a bar chart, it might be difficult to see potential patterns. When a trader has to evaluate many charts throughout the day, the complexity rises.
 
History of the Japanese Candlestick
 
As well as that, The length of the central line represents the day’s range. The difference between the high and low can be characterize as a range. The longer the line, the bigger the range; the shorter the line, the smaller the range.
 
Indeed, Even though the bar chart displays all four data points, it lacks visual attractiveness. This is most likely the most significant disadvantage of a bar chart. When looking at a bar chart, it might be difficult to see potential patterns. When a trader has to evaluate many charts throughout the day, the complexity rises.
 
Candlestick Anatomy
 
Clearly, In a bar chart, the open and close prices represent a tick on the left and right sides of the bar, respectively, but in a candlestick chart, the open and close prices represented a rectangular body.
 
Absolutely, Candles in a candlestick chart can be categorize as bullish or bearish and are often represented by blue/green/white and red/black candles. Needless to add, the colors can be change to any color of your choice using the technical analysis software. This module has chosen blue and red to represent bullish and bearish candles, respectively.
 
Besides, Consider the bullish candle. The candlestick, like the bar chart, made up of three parts.
 
The Central real body:-The real body rectangular connects the opening and closing price.
 
Upper Shadow:-Connects the high point to the close.
 
Lower Shadow:-Connects the low point to the open.
 
Last but not  least, Have a look at the image below to understand how a bullish candlestick is form:
 
An example will help you understand this better. Assume the pricing is as follows.
 
Open = 68 High = 75 Low = 63 Close = 72
 
Similarly, the bearish candle has three components:
 
The Central real body:-The rectangular actual body that connects the opening and closing prices. However, the opening is at the top of the rectangle, and the closure is at the bottom.
 
Upper Shadow:-Connects the high point to the open.
 
Lower Shadow:-Connects the Low point to the close.
 
This is what a bearish candle would look like:
 
It should be noted, This is best understood with an example. Let us assume the prices as follows.
 
Open = 461 High = 475 Low = 425 Close = 440
 
On the other hand, Reading candlesticks to discover patterns becomes much easier once you understand how they are plot.
 
Also, If you plot the candlestick chart on a time series, it looks like this. The blue candle signifies bullishness, whereas the red candle shows bearishness.
 
Also, a long-bodied candle indicates intense buying or selling activity. A short-bodied candle indicates that there is less trading activity and thus less price change.
 
To summarise, candlestick charts are easier to comprehend than bar charts. Candlesticks allow you to rapidly visualize the link between the open and close price points as well as the high and low price points.
 
A note time in the frames
 
A time frame defines as the time spent studying a certain chart. Technical analysts frequently employ the following time frames:
 
Monthly Charts
 
Weekly Charts 
 
Daily or end-of-day Charts
 
30-minute, 15-minute, and 5-minute intraday charts
 
The time frame can be change to suit the needs of the user. A high-frequency trader, for example, may prefer to use a 1-minute chart above any other time frame.
 
Here’s a basic tutorial on various time frames.