There are numerous methods for analyzing price movements, but the chart is arguably the most straightforward and visual. To delve deeper into price fluctuations, various types of charts can be used. The structure of these charts is decisive. The time interval is marked on the x-axis or horizontal axis, while price changes are marked on the y-axis or vertical axis.
When analyzing price changes, it’s common to use charts referred to as “charts”. On these charts, the time interval can range from a minute to a year.
Chart Types
The types of charts typically used in price dynamics analysis include:
- Tick charts;
- Bar charts;
- Line charts;
- Japanese candlestick charts.
Tick
Tick charts (from the word “Tick”) are best suited when you need to visualize individual quote values. Its main difference from other chart types is the absence of a traditional x-axis. In a tick chart, points move by a particular value on the y-axis (prices) and a certain standard step on the time axis.
On an active market, you can usually see a plethora of price changes. This will be reflected on the chart in the form of numerous ticks. In contrast, there’s a limited number of ticks on an inactive market.
Bars
The most common type of chart in Europe’s markets is the bar chart (Bar chart). In many cases, it’s referred to as a column chart, stick chart, or histogram. This chart is distinguished by its simplicity, with the bars showing price changes. The most important data points on such a chart are:
- Low and High (the lowest and highest price respectively) for a certain time. These indicators should be connected by a vertical line after they’re identified and displayed on the chart.
- Open (opening price). To mark it, a small horizontal line is drawn from right to left.
- Close (closing price). To mark it, a small horizontal line is drawn from left to right.
Line Chart
The Line Chart is used for analysis on a highly individual basis. It is not capable of reflecting all the data of price movement throughout the day. However, it is convenient when dealing with small amounts of data or market inactivity.
The points on a line chart indicate the closing price in a particular time interval, and these points are connected by lines to form the chart. When zoomed in, this chart appears as a smooth curve.
Japanese Candlesticks
Arguably, the most comprehensive and informative type of charts are Japanese candlestick charts (Candle Stick or Candlesticks). This chart is similar to a bar chart in that it utilizes the same four main prices. However, Japanese candlesticks are very easy to interpret, thanks to their unique characteristics and convenience. Many traders refer to this chart as ideal for the technical analysis of price movement.
Different combinations of data help interpret charts differently. Experienced analysts can determine and predict price direction. They are aided by the appearance of the candles and the primary indicators.
The structure of a Japanese candlestick is quite fascinating and unique. It features both thin and thick lines. The thick line is also called the real body (or simply body). The body represents the difference between the opening price and the closing price of a trading session. The difference is determined by the color of the body. The body will be green if the closing price is higher. Conversely, if the trend is downward and the opening price is higher, the body is colored red. Therefore, red is referred to as the color of “bulls”, and green as “bears”.
In addition to this, there are thin lines on the chart that surround the body. They represent the extreme values of the trading day and are called shadows. Shadows above the body are called upper shadows, and shadows below the body are called lower shadows. The minimum price is determined by the lower shadows, and the maximum by the upper shadows. Japanese often refer to the lower shadows as the tail, and the upper shadows as the hair.
The main difference between Japanese candlesticks and bars is their attractiveness and convenience. This aids in a quick overview of the trading day and data analysis. Therefore, the practicality and uniqueness of Japanese candlesticks set them apart from other charts.