Mainly three types of charts are used for analyzing price movements namely, the bar chart, the line chart, and the most popular candlestick chart.

LINE CHART

The most simple chart is the line chart. In this chart, a line is drawn connecting one closing price with the next. It reveals the price movement of the share during a specific period.

BAR CHARTS

The bar chart is the most basic chart used in technical analysis. It displays data of market price over a specific period.

The opening and closing price, with its high and low, is seen from a daily bar chart. The bar marks the high and low for a given period on a vertical line. A horizontal line to the left denotes the opening price, and a horizontal line to the right, the closing price.

CANDLESTICK CHART

Candlestick chart is the most popular chart used for technical analysis. The main body of the chart represents the prices that look like that of a candle. It consists of a thick body and a line that extends above or below the candle. The line seen above or below the body is known as the upper and lower shadow.

The uppermost point of the shadow above the body represents the high price. The bottommost point of the shadow below the body represents the lowest price for the period.

The body and the shadows together create various patterns of the candle. The interpretation of these patterns are useful over short periods and are significant when they are at the end of an uptrend or downtrend. The candlestick patterns usually indicate the reversal of a trend.

Although the candlestick chart provides the same information just like that of a bar chart, on a candlestick chart, the patterns give better clarity. On a candlestick chart, the opening and closing prices are emphasized. The opening and closing prices are represented by the top and bottom of the actual body.

One should note that the color of the actual body determines whether the opening and closing prices are at the top or bottom of the candle body.

If the color of the body is green, blue, or white, then the bottom represents opening. If the color of the body is red or black or any other color, then the top of the body represents the opening price.

The difference between the opening and closing prices is seen from the length of the body. A candle that is green, blue, or white is an indication of bullishness, while the one that is red or black is an indication of bearishness.

CONCLUSION

Candlestick charts are more advanced than others and can provide information that other types of chart patterns cannot give. Whatever chart one uses, it is necessary to draw trend lines to judge the direction of the price of the stock.