Types of Charts Available

The daily bar chart has already been acknowledged as the most widely used type of chart in technical analysis. There are, however, other types of charts also used by technicians, such as line charts, point and figure charts, and more recently, candlesticks. A standard daily bar chart, it's called a bar chart because each day's range is represented by a vertical bar. The bar chart shows the open, high, low, and closing prices. The tic to the right of the vertical bar is the closing price. The opening price is the tic to the left of the bar.

What the same market looks like on a line chart. In the line chart, only the closing price is plotted for each successive day. Many chartists believe that because the closing price is the most critical price of the trading day, a line (or close-only) chart is a more valid measure of price activity.

A third type of chart, the point and figure chart, is that the point and figure chart shows the same price action but in a more compressed format. The x columns show rising prices and the a columns, declining prices. Buy and sell signals are more precise and easier to spot on the point and figure chart than on the bar chart. This type of chart also has a lot more flexibility.

ARITHMETIC VERSUS LOGARITHMIC SCALE

Charts can be plotted using arithmetic or logarithmic price scales. For some types of analysis, particularly for very long range trend analysis, there may be some advantage to using logarithmic charts. On the arithmetic scale, the vertical price scale shows an equal distance for each price unit of change.