Graphical display of value range or charts for trading
There are three main types of graphical display of value: line, bar and Japanese candlestick. Each of these tools provides information on the opening price of the relevant period, the closing price, the lowest and highest prices (except for a line chart that is built only on the basis of closing prices).
A line chart is a very simple way to represent the price movement. It displays information using a regular line and a data sequence. This type of chart you probably have often met in magazines and newspapers dedicated to the stock market.
Bars: the stock bars chart provide more information than the line chart. You can see the key moments of the price change on it. The chart looks like a series of vertical lines.
Japanese candlestick chart (invented by Japanese, more than 300 years ago) displays the same price movement, but this chart consists of more elements. Traders prefer to read candlesticks, because they contain more information than line charts, and are more useful for making trading decisions. We will focus on this type of chart more, so:
Japanese candlesticks are a way of presenting the price action over a set period of time. They provide useful information, for example, about the mood of the market or possible reversals in the market, representing the prices movement in a special graphic way.
Five advantages of the Japanese candlestick charts:
1. Japanese candlestick charts give more information than the line charts;
2. Japanese candlesticks are the most popular type of chart for traders;
3. Japanese candlesticks refer to a certain period for which they are formed (the period is called the timeframe);
4. Each candle shows the opening price, the maximum price, the closing price and the minimum price (OHLC - open-high-low-close) within its timeframe;
5. The red colour of the candle indicates that the price has moved down, and the green colour of the candle indicates that the price has moved up