Exploring Charting Techniques, Part 1 by Sylvain Vervoort
Bars, Candles, or Bricks?
What type of chart should you be using? Lines, bars, candlesticks… there are so many choices. In this first part of a six-part series, an overview of charting styles is presented that may help you make the right choice for analyzing the markets.
Many types of charts are available to the trader. Here, I will look at the most common ones as well as some special ones. I’ll look at their specific application as well as their advantages and disadvantages. Later in this series, I’ll look at different technical analysis techniques that can be applied to charts.
Line charts are not as popular as they used to be. They were the basic charts used prior to the advent of the personal computer. Stock price data was written down manually, and usually only the closing prices were plotted.
Line charts are created by connecting a series of single data points, usually closing prices, with a line. It is the most basic type of chart used in finance.
The line chart you see in Figure 1 is a 30-minute chart of the EUR/USD pair for a 24-hour period. A line chart that uses closing prices does not always show clear price support & resistance levels, and drawing trendlines is no easy task. Since the open, high, and low prices are missing, you are not able to see the full range of price movement within the selected time period. Personally, I see no advantage to using line charts.