Price movement could be presented through different types of charts. Every type of chart has its characteristics. Charts are graphical presentations of price performance in the past.
The main chart types used by technical analysts are the line chart, bar chart, candlestick chart.
What are line charts?
Line charts are the most basic form of charts that are made off a single line that links the closing prices.
A single point presents the closing price.
This chart can be used only to give you a general view of the historical trend and current direction.
However, they are rarely used to look for a trade opportunity.
Since it shows you only a closing price, it doesn’t give you enough data about intraday price movements which is essential to you as a trader.
That’s the reason why we consider this type of charts useless since we have much better types of charts that give us a real picture of the market movement.
What are bar charts?
Bar charts are made of a series of vertical lines that indicate the price range during that time frame.
The opening price is the horizontal dash on the left side of the horizontal line, and the closing price is located on the right side of the line.
If the opening price is lower than the closing price, the line is green to represent a rising bar.
The opposite is true for a falling bar, which is represented by a red color.
While we can see much more of an intraday action, we are not using bar charts because we found it not as good as our next type of charts.
What are candlestick charts?
The name comes from the main component of the chart that represents the price action that looks like a candlestick.
It has a body and in most cases a line extending above and below creating upper and lower wick.
As you can see in an example, the left candlestick is represented as a bearish one.
The bearish candlestick means that the price has fallen in the time frame that is represented by that single candlestick.
On the right, we have an example of a bullish candlestick.
The bullish means that price has risen in the time frame that is represented by that candlestick.
Milos is an independent trader, with a background in journalism and publishing. Nomadic by nature, he’s lived in four different countries this decade. He’s fascinated by Blockchain technologies’ potential to reshape all aspects of our lives. Milos got into Bitcoin while completing his degree and hasn’t looked back since, writing about anything crypto-related. He is the co-founder of the Cryptoaims and he has a strong passion to educate people about this revolutionary technology.