Candlestick Charts How Line and Bar chart Enhance Market Analysis

  1. Technical Analysis
    1. How Technical Analysis Can Help You Make Informed Decisions in Mastering Stock Trading
    2. Technical Analysis Setting Realistic Expectations
    3. Introduction to Technical Analysis and Assumptions
    4. Technical analysis for Profitable Trades Analyzing Open, High, Low, and Close
    5. Candlestick Charts How Line and Bar chart Enhance Market Analysis
    6. Japanese Candlesticks History, Anatomy From Ancient Japan to Global Trading Phenomenon
    7. Time Frames in Technical Analysis Unlocking the Power of Choosing the Right Interval for Successful Trading strategy
    8. Candlestick Patterns How to Identify and Interpret Trading Signals
    9. Marubozu and Bullish Marubozu Understanding What is Essential Single Candlestick Patterns for Traders
    10. Marubozu Candlestick Setting Stop Loss The Ultimate Guide to Trading Patterns
    11. Spinning Top Candlestick Navigating Downtrends A Trader’s Guide to Identifying Reversal Signals
    12. Spinning Top and Doji How to Interpret and Navigating Market Uncertainty
    13. Paper umbrella and hammer candlestick pattern Unlock Profitable Trades
    14. Hanging man candlestick pattern Profitable share market trading Strategies
    15. Shooting Star Candlestick Pattern Boost Your Trading Success Guide
    16. Engulfing Patterns and Bullish Engulfing Signals Unlock Trading Opportunities
    17. Bearish Engulfing and Doji for Trading Success Profitable Strategies with Candlestick Patterns
    18. Multiple Candlestick Patterns Insights and Strategies Boost Your Trading
    19. Bullish Harami Candlestick Pattern for Trend Reversal Strategies
    20. Shorting Guide using the Bearish Harami Pattern Trade Reversals with Confidence
    21. Morning Star Candlestick Pattern and Gap Analysis To Maximise Your Profits
    22. Evening Star Candlestick Pattern Learn How to Identify and Trade to Boost Your Trading Success
    23. Support and Resistance Basics A Comprehensive Guide to Setting Targets and Navigate the Markets with Confidence
    24. Support and Resistance Learn How to Draw and Identify Key Levels Unlocking Trading Opportunities
    25. Support and Resistance Advanced Trading Strategy Analysing Reliability and Optimisation
    26. Volume Trends How to Leverage for Successful Trading Strategy
    27. Volume Analysis A Key Checklist for Successful Stock Trading
    28. Moving Averages A Comprehensive Guide for Trend Analysis in Stock Trading
    29. How to Use Moving Averages for Profitable Trading Strategy and Potential Opportunities
    30. Moving Average Crossover Boost Your Trading Success with A Reliable Strategy
    31. Technical indicators How to Use Technical Tools for Better Decision-Making Unlocking the Power of Trading
    32. Relative Strength Index RSI Analysing Overbought and Oversold Signals to Boost Your Trading Strategy
    33. MACD How to Interpret and Utilize Moving Average Convergence and Divergence for Profitable Trading
    34. Bollinger Bands The Power of Indicators in Trading and checklist
    35. Fibonacci Retracements Unravelling the Power in Stock Markets
    36. Mastering Fibonacci Retracement A Step-by-Step Guide for Effective Trading
    37. Dow Theory Decoding Unveiling the Principles of Technical Analysis
    38. Dow Theory Patterns Unlocking Trading Opportunities with Double and Triple Formations
    39. Trading Range Explained chart indicator example strategy Profit from Market Ranges
    40. Flag Pattern and Range Breakout How to Capitalise Trading Beyond Boundaries
    41. Risk reward ratio Understanding RRR in Dow Theory
    42. Technical Analysis Tools for Traders Charting Software Guide Enhance Your Trading
    43. How to Select Stocks for Trading Success and Building Your Opportunity Universe
    44. Short Term Trading Unleashing the Power of Scalping Strategies
    45. ADX Indicator and 7 more indicator tools for Trend Strength Analysis
Marketopedia / Technical Analysis / Candlestick Charts How Line and Bar chart Enhance Market Analysis

Recognizing that the Open (O), high (H), low (L), and close (C)  are the most effective ways to summarize trading activity for a given period, we need charting methods which show this information clearly. 

Charting can also become complicated. Each day has four pieces of data – the OHLC – so tracking ten days would be forty individual points (1-day x 4 data points per day). To get an accurate picture over longer periods like six months or a year, it is essential to have efficient methods for representing the data.

The usual charts – column, pie, area etc. – are unsuitable for technical analysis; the lone exception being the line chart.

Regular charts are inadequate for Technical Analysis, as they only show one data point at a given moment. In contrast, Technical Analysis necessitates the simultaneous display of four data points.

Given below are several kinds of graphs.

  1. Line Graph 

A line chart is a type of graph that shows information as a series of data points connected by straight lines. It is used to display the evolution of one or more variables over time. Line charts can help track changes and trends in data over intervals of time, such as days, weeks, months, quarters, or years.

  1. Bar Chart 

A bar chart is a graphical representation of data. It is made up of rectangular bars, with the length of each bar being proportional to the value it represents. Bar charts are used for a variety of purposes in data analysis, including comparison and visualisation.

  1. Japanese Candlestick

Japanese Candlestick Charts are one of the most popular tools used by technical traders. They are known for their visual appeal and simple construction. The ability to quickly and easily identify patterns in the chart makes them popular among those looking to identify trends or trading opportunities in the markets.

This module centres around Japanese Candlesticks, so before delving into the specifics, we will first explain why line and bar charts aren’t used.

  1. The Line and Bar chart

The line chart is the most fundamental type of chart, taking one data point to form it. In terms of technical analysis, this chart consists of a stock’s closing prices or an index represented by dots and connected with a line.

If we examine the 60 days, then a line chart emerges by linking the day’s end values.

Line charts can be used to map closing prices over different intervals, such as monthly, weekly or even hourly. If you want to make a weekly chart, closing prices of securities and other time frames.

The line chart is appreciated for its straightforwardness, allowing the trader to quickly assess the general direction of a security. Nonetheless, this lack of detail makes it unreliable since it uses only closing prices without taking into account the open, high and low values. As such, traders tend to avoid this type of chart.

  1. The Bar Chart 

The bar chart is more flexible, showing all of four prices: open, high, low and close. The individual bar comprises three elements.

– The top of the central line shows the highest value that the security has achieved while its bottom indicates the least amount it was traded for during that period.

– The right mark/tick – indicates the close.

– The correct mark/tick signifies the completion.

For example, assume the OHLC data for a stock as follows:

Open – 65

High – 70

Low – 60

Close – 68

For the above data, the bar chart would look like this:

As you can see, in a single bar, we can plot four different price points. If you wish to view a 5 days chart, we will have 5 vertical bars as you would imagine. So on and so forth.

The left and right boundaries of the bar chart shift depending on the fluctuations in the market for that day.

If the left mark is lower than the right, it implies the close was higher than the open (close > open), thus making it a positive day for the financial markets. As an example, if O = 46, H = 51, L = 45, C = 49 then this is typically represented by a blue bar as it signifies a bullish day.

If the left mark is greater than the right mark, it indicates that the close is less than the open (close <open), signifying a bearish day for markets. For instance, consider this situation: O = 74, H=76, L=70, C=71. The bar is usually depicted in red colour to further illustrate that it is an adverse market.

The central line’s length reflects the day’s range, which is the difference between the high and low. The greater the line’s length, the bigger the range; similarly, a shorter line indicates a smaller range.

A bar chart lacks visual appeal and makes it difficult to identify patterns. Even when only looking at a single chart, it can be challenging to spot potential tendencies while analysing multiple charts throughout the day is an even greater issue.

Therefore, those beginning in trading are advised to use Japanese Candlesticks as the default choice from the majority of the trading community. Bar charts are not used by many traders, however some that do exist prefer to use this technique.