Chart Type
Technical Analysis uses chart to display price movement of financial instrument over time. There several chart type commonly use: Line chart, OHLC chart, and Candlestick chart.
Line chart
In Line chart, each closing price is connected to each other. Therefore Line chart is the most simple compared to other charts. You can read price data with ease. But Line chart only display closing price.
OHLC chart (open-high-low-close chart) or Bar chart
This chart can display opening, high, low, and closing price of a financial instrument over time. Each vertical line on the chart shows the price range (the highest and lowest prices). Other small horizontal lines represent opening price (on the left), and the closing price (on the right).
Candlestick chart
The Japanese candlestick chart is almost the same with OHLC chart, because this chart can also display opening, high, low, closing price. The advantage of this chart is some traders find the candlestick chart easier to read. This site will focus to explain on how to read and use Candlestick chart.
Kagi Chart
The Kagi chart is a chart used for tracking price movements. The Kagi chart is very effective in showing a clear path of price movements. The most important benefit of this chart is that it is independent of time and change of direction occurs only when a specific amount is reached. The Kagi chart was originally developed in Japan during the 1870s. It was used for tracking the price movement of rice and found use in determining the general levels of supply and demand for certain assets. A Kagi chart is created with a series of vertical lines connected by short horizontal lines. The thickness and direction of the lines is based on the price of the underlying stock or asset, as follows:
(1) The thickness of the line changes when the price reaches the high or low of the previous vertical line.
(2) The direction of the line changes when the price reaches a preset reversal amount, which is usually set at 4%. When a direction change occurs, a short horizontal line is drawn between the lines of opposite direction.
Alternatively, thin and thick lines can be replaced with lines of different colours, such as the green/red example in the figure below. Changes in line thickness are used to generate transaction signals. Buy signals are generated when the Kagi line goes from thin to thick and sell signals are generated when the line turns from thick to thin.
Go back to Learning Technical Analysis Index
| < Prev | Next > |
|---|
