Daily Chart, Daily Charts
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
A daily chart displays the price movement of a financial security, such as currency and shares, over the period of a trading day. This chart is represented by a line graph that depicts the intraday movements of a given financial security. Daily charts provide a micro perspective of long-term charts. They are used mostly by day traders to form short-term strategies.
Table of Contents
Composition of a Daily Chart
A daily chart depicts the intraday data in the vertical and horizontal axis. On the chart, the vertical axis represents the price scale and the horizontal axis depicts the time scale. Prices are plotted from the left to the right, with the latest price point depicted on the farthest right.
Uses and Limitations of Daily Chart
Daily charts show a greater level of detail, in some cases showing minute-by-minute price movements. Since data in the daily charts is in the least compressed form, it is preferred by those who want to see detailed data, particularly day traders in the forex and stock markets. It helps to forecast short-term price movements. These charts can help investors to identify strong intra-day patterns of financial securities, which help to generate trading ideas during and at the end of the day. Daily charts can also be used at the end of each trading day to identify whether the support and resistance levels of a stock or currency have been penetrated during the day. Daily charts indicate high price volatility. This can distort the overall picture and impact trading decisions.
Daily Chart vs. Longer-Term Chart
The limitation of daily charts can be overcome by using them in conjunction with other longer-term charts (weekly or monthly) to analyze the performance of a financial security. Then, investors can assess the overall trend of a financial security on the longer-term chart. Such analysis of the overall price movement will enable investors to understand whether to buy, sell or hold on to the stock or currency. Based on this understanding of price trends, investors can come back to a daily chart and focus on the latest price action.
By shifting focus to understand the broader perspective, investors can eliminate the noise and worry caused by frequent daily price fluctuations.
