Stock market is all about prices.

Stock market is all about prices. A stock can be loss making if you buy it at the wrong price. Technical analysis is mainly about getting the price right. For understanding this, you need to know what a chart is. Now let us discuss about the three broadly used technical charts:-a) Line Charts b) Bar Charts c) Candlestick Charts.

Line Charts:- A single line which connects stock prices is known as a line chart. A line chart is the most simple type of chart. It is often used to visualize a trend in data over intervals of time. Let us suppose that the closing price of the stock on March 31 2018 was Rs 120. For plotting this in the chart you will have to put a dot in such a way that it is right above the marking for that date on the x axis and alongside the mark which says Rs 120 on the y axis. Then you do this for all the other dates. In the second step connect all the dots plotted with a line. That’s it. You have made your line chart. In the chart shown, you can see that the price oscillates between 2100 and 2200 from the period of September to November.

Bar Charts A bar chart is almost the same as a line chart. But it is much more informative. Here each marking on a bar chart is in the shape of a vertical line with 2 horizontal lines protruding out of it on either side. A chart which has open, high, low and close data sets in a vertical line in the form of a bar known as bar or OHLC chart. An OHLC chart is shown.

Candlestick Charts- They are technical tools which pack data for multiple time frame into a single price chart. A chart that has open, high, low and close data sets in a candle form is known as candlestick chart. A candlestick chart is shown

We have discussed about the 3 main charts used in technical analysis. Now you may be wondering which chart I should use. We have a solution for that also. Bar and candlestick charts are widely used as the open, high, low and close data gives a quick overview of the day’s market psychology as well as trading activity. Candlestick and bar charts show the same thing. However, candlestick charts are easier to read as trader can immediately see and compare the relationship between the open, close, and also high and low.

This relationship between the open and close is important information and this forms the essence of candlesticks. Another reason that makes candlestick charts more appealing than the bar charts is that they provide information about volatility of a specific period of time. Bar charts display volatility which occurs within each trading day. On the other hand candlesticks are of two shades-light and dark. When the opening price is greater than the closing price, they are green or white and on days when the closing price was higher than the opening price, they are black or red. Therefore compared to bar charts many traders use candlestick charts more as they are visually more appealing.

There’s also a branch of technical analysis which studies different patterns formed by the candlesticks charts in order to forecast future price movements as well as reversals which we will discuss in the next video.

Thank you for watching the video.