Charts

Charts

Charts are the investor's best friend on the stock or crypto market. As an investor, you'll probably use charts more often than other available tools. As the charts will probably play a significant role in your investments, it is necessary to familiarize yourself with them. The more comfortable you feel using the charts, the better you will be an investor.

To help you get acquainted with and effectively use charts, we will further develop the following concepts:

• Rules for creating charts
• Time periods of charts
• Types of charts

Chart options

Let's start with the basics and look at how the price charts are created. When you understand the basics, you will be more successful in applying the more advanced concepts of technical analysis.

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• The graph consists of two axes: the X axis (horizontal) and the Y axis (vertical).
• The X axis runs horizontally along the chart, indicating the time of price changes that have occurred on the selected instrument.
• The Y axis runs vertically along the left part of the graph, showing the price movement on the chart. Lower prices are at the bottom of the axis, higher at the top.
• When you put together the X axis with the Y axis, you'll see the exact stock prices in the time period you have chosen in the past.

Time periods of charts

Charts allow you to analyze the movement of prices of shares selected by you in different time periods:

• Minutes
• Hourly
• Daily
• Weekly
• Monthly

If you are a short-term player, you will use shorter periods in your charts. In the case of a long-term approach, charts with a larger time range may be used. For example, an investor wishing to make a quick transaction with a profit of 10-20 cents will probably use minutes charts. An investor who wants to keep positions for much longer, uses hourly or even daily charts.

Some investors use charts with different periods at the same time, so that they can watch the movement of prices from different points of view. We will discuss this concept later.

Types of charts

Charts give you the opportunity to analyze the price movements of any action in various formats: line charts, bar graphs, candle charts. You have the option of choosing a way of presenting the data that suits you best.

Technical analysis is a visual, almost artistic, skill that investors develop by trying different variants. Some believe that they can better determine support or resistance levels in line charts, while others believe that candle charts provide more information.

Technical analysts usually use one of the following three chart types:

Line graph

Line charts are the most basic type of chart. Technical analysts often use these kinds of charts to identify support or resistance levels more easily. These charts contain only basic information.

Creating a line chart involves combining all courses, e.g. closing or opening. Line charts can also show all transactions that took place in a given period (intraday charts). The line chart (intraday) is shown in the following illustration.

A bar graph

Bar charts provide more information than line charts. Technical analysts often use charts of this type to observe how prices changed during each period in the chart. While the line graph only shows closing rates, the bar chart also shows the opening price, maximum and minimum values ​​for each period.

Creating a bar graph involves drawing a series of bars along the graph. Each bar represents one period. To create a bar, it is necessary to draw the maximum and minimum price from the selected period. Then, mark the opening price on the left side of the post with a horizontal line and the closing price on the right.

The opportunity to see the opening level of the selected period for a given company and the closing level allows better identification of trends. If the price closes higher than the opening, it means that demand for the selected period prevailed. Conversely, when closing below the opening level.

Candle chart

Candle charts provide the same information as bar charts, but in a slightly different format. Technical analysts very often use candle charts as a replacement for bar charts, mainly due to the ease of identifying different patterns of market behavior. In fact, on the basis of this kind of charts, the field of chart analysis was created.

Creating candle charts is about sketching the next candles along the chart. Each candle represents one period. Creating a candle consists in drawing a vertical line connecting the maximum and minimum for a given period. This line is called the candle's shadow. Then, use horizontal lines to open and close and fill in in sequence.

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