Understanding Financial Industry Charts
Day traders use trading charts to keep an eye on the market and specific securities, and as an analytical tool used for executing trades.
The most popular trading charts are candlestick charts, bar charts, and line charts.
No matter what type of chart a day trader uses, each chart will have a select timeframe that determines the type of trading information that they will represent. Some timeframes are based upon time, but other timeframes can be based on the number of trades of a security or its number of contracts. The most popular timeframes are:
Tick (Number of trades)
Volume (Number of contracts)
A candlestick chart is a tool used for the technical analysis for a stock. It displays the open price, close price, high price, and low price for a security each day over a specified period of time.
A bar chart illustrates the movements in the price of a security over a specified amount of time – hour, day, week, etc.
The tick marks that project from each side of the line indicating the opening price (on the left) and the closing price (on the right) for that time period. Like the candlestick chart, different colors may be used to represent rising or falling prices.
This is the most basic type of chart used in the financial industry, and its popularity is diminishing as more investors find the bar chart and candlestick chart easier to read. The line chart is created by connecting a series of data points (in finance, past prices) together with a line.