The entire technical analysis is based on study and analysis of the price charts. As people differ from each other, and the strategies differ from each other, there are various types of charts.
Nowadays, three basic types of the price charts are used. They are as follows: line (simple), bar, and candlestick. I give an explanation of each, but what chart to use it’s up to you.
All charts have a set period of time:
- М1 – a minute
- М5 – 5 minutes
- М15 – 15 minutes
- М30 – 30 minutes
- Н1 – 1 hour
- Н4 – 4 hours
- D – 1 day
- W – 1 week
- MN – 1 month
You can meet other timeframes in the latest platforms, like from 2 minutes to 12 hours, that use such charts as Kagi, Hollow Candlestick, Cross Zero, Heikin-Ashi. However, the cases of their usage are rare.
All financial, commodities and other markets around the globe chiefly use one of the three charts where a period of time, for instance, M5 means 5 minutes between two points on a chart scale.
This is the simplest chart type. It is considered the basic type.
All price changes are shown as a simple line generating various patterns on the chart. This chart shows the price at the end of each period as the price at this point is resulting and the most important. Line charts are better to use with short-term positions, for instance, in case you buy a binary option for a minute. To use this chart type in short-term trading is really convenient.
A bar chart is a little bit more complicated than a line chart because it shows more information. The line chart shows the price at the end of a period, the bar chart shows the price both at the beginning and at the end of o period and maximum and minimum points, or, in other words, upper and lower points of extremum.
High, H (the point at the top of the bar) is a maximum point that the price can reach.
Low, L (the point at the bottom of the bar) is a minimum point that the price can fall.
Open, О is an opening price that is a starting point of a bar. It’s marked as a dash at the left of the bar.
Close, C is a closing price or the last price of a period. It’s marked as a dash at the right of the bar.
This is the most complicated informative and popular chart.
In addition to the information that bars show, the Japanese candlesticks show the market direction, i.e., the trend. The color of a candlestick shows bullish or bearish market behavior. The bullish (upward) trend marks the candlesticks with white or green, and the bearish (downward) highlights them in black or red.
Due to clarity, the Japanese candlesticks became popular and used everywhere by default.
All chart types may be used in the strategies based on the patterns of the technical analysis, for example, Triangle etc.