• 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