Stock Charts, Stock Chart

Charts that graphically depict the fluctuations in stock prices and trade volume are called stock charts. They are used mainly for the technical analysis of equities in the stock market. These charts help in making calculated estimates about the trends in price movements and trade volume. Experts who create stock charts are called chartists.

Types of Stock Charts

The two types of charts that are most commonly used for technical analysis are:

Bar charts: In a regular bar chart, price is plotted on the vertical axis (y-axis) and time on the horizontal axis (x-axis). It has one bar whose vertical length reveals the highs and lows in stock prices over a specified period of time, which could range from a minute to one month. The opening and closing prices are plotted as small horizontal lines, branching out from the left and right side of the main bar. Bar charts are used primarily to predict price variations over a period of hours, days, weeks or even months.

Candlestick charts: These charts are similar to bar charts. However, candlestick charts lay greater emphasis on the closing and opening prices of a stock. The vertical slabs used for the diagrammatic presentation resemble candlesticks with wicks at both ends. The candle portion, which is also known as the ‘real body,’ is the soul of candlestick charts. Its structure is determined by the value of the day’s opening and closing prices. The wicks, which are also known as “shadows,” reveal the price range for the selected time period. When the closing price is greater than the opening price, the candle portion is either colored red or left blank. Conversely, when the closing price is lower than the opening price, the real body is colored black.

Apart from bar charts and candlestick charts, investors also use:

Equivolume charts: Chartists supporting equivolume charts believe that predictions of price movements should be based on volume rather than time. Hence, these charts plot price (y-axis) against volume (x-axis).

Point and figure charts: These charts focus on price volatility, revealing even minute price fluctuations. Chartists draw ‘Xs’ and ‘Os’ in boxes or columns with a predefined box size. An ‘X’ is drawn when the price is higher than the upper limit and a ‘O’ is drawn when the price falls below the predefined limit. At the end of the day, price levels where the maximum number of Os and Xs are marked depict the support or resistance price for the next day.