Charting


Charts reveal much about the market nature of a security. They show how volatile it is as well as possible break points in the future. Charts are specifically market-related. While the study of fundamental data shows us what a security should be doing, charts tell us what the security is doing.

The 3 main types of charts are bar charts, line charts and candle charts.

A Bar chart depicts the days' open, high, low and closing prices for a given day. They are represented as a vertical line with two horizontal bars. The top and bottom of the line represents the highest and lowest prices for that day. The left-hand bar shows the opening price and the right-hand bar the closing price. Bar charts are also used to show the low and high prices of a security for a time period shorter than a day, for example, every half-hour.

A Line chart plots the closing price for each day. Each of these plots is connected forming a line. Line charts are good general indicators of the price of a security but do not give any information regarding the highs and lows for any particular day.

A candle chart depicts the different prices of a security (open, low, high and closing) for a particular day. Candle charts offer more detail regarding volatility. A white candle normally shows a higher move, while a red or black candle is used to depict a lower move. Long white candles indicate that the market is being driven up, while long red or black candles show the reverse. The shorter the candle, the more the indication of uncertainty for the move at that time.

Intra-day charts are useful when monitoring short-term trades. They can be updated every minute, 15 minutes or whatever time-frame proves to be of value. Naturally, the shorter the time-frame, the more the chart will fluctuate.

Like Elliot Wave theory and Fourier projections using moving averages, charting methods and techniques base their expectations of future movements on past ones. This serves conventional trading to an extent, but not much for contrarians and speculators looking for the timing of big and unexpected reversals. For those looking for greater than average returns with a good chance of getting it right, I recommend using the Sun-Jupiter dates as mentioned on the Stock Markets page.

 

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