Types of Charts
Charts are the foundation of technical analysis. Understanding different chart types helps you visualize price action effectively.
Technical analysts believe that price patterns repeat and that charts reveal the collective psychology of market participants.
Why Use Charts?
Charts help you:
- Visualize price movements over time
- Identify trends and patterns
- Spot support and resistance levels
- Make entry and exit decisions
Raw price data is hard to interpret. Charts make it visual.
Line Charts
The simplest chart type – a line connecting closing prices.
How it's made:
- Plot the closing price each day
- Connect the dots
| Pros | Cons |
|---|---|
| Good for long-term trends | No high/low data |
| Less visual noise | Can miss reversals |
Best for: Getting a quick overview of the trend.
Bar Charts (OHLC)
Shows Open, High, Low, and Close for each period.
How to read:
- Vertical line shows the range (high to low)
- Left tick = Opening price
- Right tick = Closing price
| Pros | Cons |
|---|---|
| Traditional format |
Bar charts were popular before candlesticks became widespread. Many Western traders still prefer them.
Candlestick Charts
The most popular chart type for modern traders. Japanese in origin.
Anatomy:
- Body shows open to close range
- Wicks (shadows) show high and low
- Green/white body = price went up (bullish)
- Red/black body = price went down (bearish)
| Pros | Cons |
|---|---|
| Industry standard |
We'll cover candlesticks in detail in a later module.
Area Charts
Like line charts but with the area below filled in.
| Pros | Cons |
|---|---|
| Good for presentations | Not for analysis |
Best for: Financial media and general audiences.
Comparison Summary
| Chart Type | Information Shown | Best For |
|---|---|---|
| Line | Close only | Long-term overview |
| Bar (OHLC) | Open, High, Low, Close | Detailed analysis |
| Candlestick | Open, High, Low, Close | Pattern recognition |
| Area | Close with fill | Visual presentation |
Most serious traders and analysts use candlestick charts. They provide the most information while being easy to interpret.
Choosing Your Chart Type
For beginners:
- Start with candlesticks – they're the industry standard
- Use line charts for quick trend checks
- Eventually, the choice becomes personal preference
Chart Settings
Beyond chart type, you can customize:
- Colors (bullish/bearish candles)
- Grid lines
- Price scale (linear vs logarithmic)
- Background color
Start with defaults, then adjust as you learn.
Key Takeaways
- Line charts are simple but show only closing prices
- Bar charts show OHLC but can look cluttered
- Candlestick charts are the most popular and informative
- Choose based on your analysis needs
- Most technical analysis uses candlestick charts
Next: Now that you know the chart types, let's learn to read them properly.
Sources & Disclaimer
- Standard Market Conventions for Technical Analysis
- BSE/NSE Charting and Analysis Guides
Note: Any benchmarks (e.g., "Good ROE is > 20%", or specific P/E ranges) are simplified industry heuristics for educational purposes. True evaluation depends on specific industry context, market cycles, and individual company circumstances.