- Types of Charts
- Line Charts
- Bar Charts
- Candlestick Charts
Types of Charts
Line Chart
- Closing prices are connected with a line
- Overview of price movement and easy to understand
- Good tool for a non-specialized audience
- Simplicity sacrifices details
- Does not show Open, High, Low prices
Bar Chart
- A bar represents the range of each time period
- The tick to the left shows the Open price
- The tick to the right shows the Close price
Bar Chart
- Widely used chart type in technical analysis
- Shows all important price elements
- Tops and bottoms clearly outlined
- Extra information might obscure the message
- Experience is needed for interpretation
Candlestick Chart
- Candlestick are considered to be the Japanese version of bar charts
- Using the open and the close, we draw the body of the candle
- The high and low are shown with vertical lines from the body, known as shadows
Candlestick Chart Colours
- Colour differentiates between a bullish and bearish candle
- In a bullish candle the close is higher than the open and the candle is painted green
- In a bearish candle the close is lower than the open and the candle is painted red
Candlestick Chart
- Candlestick charts have became a very popular way of charting
- Shows all important price elements and provide visual insight about price action
- Used as triggers towards buy and sell signals
- Extra information might obscure the message
- Experience is needed for interpretation
Bar Chart vs Candle Chart
- Current Close < Previous Close = Red Bar
- Current Close > Current Open = Green body
Bar Chart vs Candle Chart
- Current Close > Previous Close = Green Bar
- Current Close < Current Open = Red body
- Heiken Ashi Candlesticks
- EquiVolume Charts
- Point & Figure Charts
- Renko Charts
Average Price Bars - Heiken Ashi
- Heiken = “Average” and Ashi = “Pace”
- Visual tool to help better identify trending periods
- Averaging technique that removes the noise from price charts in an attempt to smooth out the trend
- Uses the open-close data from the previous period and open-high-low-close from the current period to create an average
- Heiken Ashi Candlesticks can also be used to identify price patterns and potential supports and resistances
Heiken Ashi - Calculation
Japanese Candles vs Heiken Ashi Candles
- Notice the noise and the gaps
- Clear advance and declines with no gaps
EquiVolume Charts
- Developed by Richard W. Arms Jr., as a price plot that incorporates volume into each period
- EquiVolume boxes put price action and volume together for easier visual analysis
- Similar to candlestick charts, but the candlesticks are replaced with EquiVolume boxes that can be squares or rectangles
EquiVolume Charts
- EquiVolume box consists of three components: High, Low and Volume
- Boxes are black when the close is above the previous close
- Boxes are red when the close is below the previous close
- Volume dictates the width of the box
EquiVolume - Reversals
- Classic patterns still show up with the added bonus of having volume built into the pattern
- This makes it easier to verify reversals, continuations, and breakouts through volume
- Wide boxes show increased volume at the breakout and acts as further confirmation
Point & Figure Charts
- Point and Figure is the oldest western charting technique
- It represented a very easy way of analysis before the existence of computers
- Using just a pencil and graph papers, P&F chartists were able to update and analyze a large number of charts every day
Point & Figure Construction
- Point & Figure charts consist of price boxes that represent a price move of a fixed size
- Prices go up in rising columns of X’s
- Prices go down in descending columns of O’s
- If the box size is set at 10 points, a move of 10 points or more is required to draw a new X or a new O
- Price movements less than 10 points would be ignored and the P & F chart would remain unchanged
Point & Figure Characteristics
- Filter insignificant price movements and noise
- Remove the time aspect from the analysis process
- Support/Resistance levels are easier to identify
- Provide automatic and subjective trendlines
Renko Charts
- The Renko charting technique ignores time and focuses solely on price changes
- Renko charts use price “bricks” that represent a fixed price move
- Bricks have a fixed value, used to filter out smaller price movements
- If the brick value is set at 10 points, a move of 10 points or more is required to draw another brick
- Price movements less than 10 points would be ignored and the Renko chart would remain unchanged
- Bricks move up or down in 45 degree lines
- Trends, supports and resistances are more clearly outlined
