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Join NowTechnical analyse requires you to use different kind of chart to observe market trend.
Thus, it is important for you to understand how to read these charts.
Line is the most basic and simple form of technical chart as it only reflect the average price level at a given period.
Each point of the line is plotted using the closing price of that day or month. While a line chart allows you to observe the market trend with ease, it does not provide any more details.
Unlike line chart, bar chart also displayed the open, lowest and highest price of the given period.
The top represents the highest and the bottom denotes the lowest of the period. Off on the left of the bar is a horizontal line denoting the opening price and off on the right is another horizontal line denoting the close.
Candlestick is really similar to bar chart in nature but with a more obvious visual design. The top and the bottom of the candlestick represent the high and low of the period while the body itself represent the open and close price.
If the candle colour is red then it represents a drop in price and vice versa for the green colour. However, this colour code is reversed in the China region where the colour red represents an increase in price and the green, a decrease in price:
Candlestick is the most popular chart of the three since it is the most informative and visually pleasing.
The body of the candlestick indicates the pressure between the buyer and seller. If the green/red candlestick have a long solid body, this indicates that the buyers/sellers are outweighting the sellers/buyers.
On the other hand, the shadow of the candlestick can also tell us alot of about the buying and selling pressure as a candlestick with long shadow may indicate that there are alot of pressure coming from the opposite direction.
