Monday, 17 July 2017

Three Stock Chart Patterns That Every Investor Must Know

In share trading, the charts play a significant role to analyze the data relevant to stocks or commodities. If you do not have a proper understanding of chart patterns then you may fail in generating accurate share market tips. Hence you need to learn about stock chart patterns, in order to analyze market trend. The technical charts are four main kinds and they are Line chart, Bar Chart, Candlestick chart and point and figure charts. 

However, this article embraces only three main stock chart patterns that you must know.

1 Line Charts:
Line Chart, Stock Chart

The line chart is the basic type of chart, which shows the representation of the closing price of the stocks or commodities over the period of time. The chart is formed by connecting all the closing prices of the stocks over the certain period. The line chart is said to be the basic chart, as it does not show all the prices like high, low and opening prices of the securities. Nevertheless, the closing price of the stocks is considered the most important information to predict the future price of the stocks as compared to the high and low prices.

2 Bar Charts:

Bar Chart, Stock Chart

A bar chart is a more detailed chart than the line chart as it has more information on the price of the stocks. The chart is made up of vertical lines, which represents the data points of the stocks. The data points include the high price of the stock, low prices of the stocks and the closing price of the stocks over certain time. The dash of the left side of the vertical bar shows the opening price of the stock. The dash on the right side of the vertical bar shows the closing price of the stocks. In the case, when the open is lower than the close then there is uptrend of the market.

3 Candlestick Charts:

Candlestick Chart, Stock Chart

Candlestick chart is similar to bar charts, only there is the slight difference in the representation. The technical analysts might get confused in between candlestick chart and bar chart. The difference in between bar chart and the candlestick chart can be observed in the way they are represented in the graph. The chart represents the vertical lines which show the data points. The wide bar in the vertical lines represents the opening and closing price of the stocks in the chart. The candlestick charts heavily rely on the colors used in the charts. Different colors have different significance. 

However, a major problem is observed related to the color configuration of the candlestick charts, as colors of the chart are not standardized. That is different chart site use different colors to represent the graph, which leads to misunderstanding. 

Therefore, it is good to understand the chart color configuration before it is used. Generally, two colors are used in the chart. One color is used to represent the price hike and the other color shows the downfall of the price. It is sure, when the price of the stock is up and above the opening trade then it is shown by the clear/transparent or white color. However, when the price of the stock is down for the period then it is represented by the red color or the black color.

All these stock chart patterns are used to analyze the market and thus generate accurate stock market tips.

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