Trading Chart
Last updated
Last updated
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Charts are graphical representations of data. In technical analysis, charts are used to display past and current price and volume data for securities, such as stocks, bonds, and commodities. Charts can be plotted using various time frames, such as daily, weekly, or monthly intervals, and can be presented in various formats, such as bar charts, candlestick charts, and line charts.
The most commonly used charts are:
Line Charts
Candlestick Charts
Heikin Ashi Charts
Line charts typically only display the closing prices of securities, eliminating noise from less important times of the trading day, such as the open, high, and low prices. This helps to focus on the most significant price movements and identify trends more clearly.
Example of Line Chart
The most common type of trading chart used by traders is Candlestick Charts. A candlestick chart is a type of financial chart that displays the high, low, open, and close prices of a security over a given time period. Candlestick charts are useful for identifying trends, as they provide a visual representation of the relationship between the open and close prices.
Example of Candlesticks
What Are the Parts of a Candlestick Chart?
A candlestick chart consists of a series of candlesticks, each of which represents the price action for a specific time period, such as one day or one week. Each candlestick is made up of several parts, including the body, the wick, and the shadow.
The body of the candlestick represents the range between the open and close prices for the time period being plotted. If the security closed higher than it opened, the body of the candlestick is typically white or hollow. If the security closed lower than it opened, the body of the candlestick is typically black or filled in.
The wick, also known as the shadow or tail, is the thin line extending from the top or bottom of the body. The wick represents the high and low prices for the time period being plotted. The top wick represents the high price, and the bottom wick represents the low price.
The shadow, also known as the tail or wick, is the thin line extending from the top or bottom of the body. The shadow represents the high and low prices for the time period being plotted. The top shadow represents the high price, and the bottom shadow represents the low price.
Example of Candlestick Chart
Heikin-Ashi candlesticks are a type of charting technique used in technical analysis to identify trends and predict future price movements. They are similar to traditional candlestick charts, but they are constructed using a different method that helps to smooth out the price action and filter out noise.
Heikin-Ashi candlesticks are constructed using the following formula:
Open price = (open + close of the previous candle) / 2
Close price = (open + high + low + close) / 4
High price = maximum of the high, open, or close price
Low price = minimum of the low, open, or close price
The resulting candlesticks have a unique appearance, with the body being wider and more rounded than traditional candlesticks. Like traditional candlesticks, Heikin-Ashi candlesticks can be plotted using various time frames, such as daily, weekly, or monthly intervals, and can be used in conjunction with other technical analysis tools, such as moving averages and oscillators, to help identify trends and predict future price movements.
The downside to Heikin-Ashi is that some price data is lost with averaging, which could affect risk.
Example of Heikin-Ashi Candlesticks
