By Abhishek Agarwal
There is more to future charts than just patterns on the wall. They can be a crucial aspect in a company’s success. Through these charts, investors can predict the future outcome and trends on the market.
Make sure you are aware of the terms used to describe the graphs to be able to make full use of them.
The first question many would ask is on what a price chart basically is. It is, in fact a lineage of prices that you plot against time intervals. It can therefore be called a time series plot as well.
When we are talking about futures commodity graphs, the y axis would represent price changes and the x axis would represent the time intervals on which the changes are noted.
Analysts use such charts to track the changes or stability of their stocks, and investors use them to predict the future trends in the market. They prove as vital tools to the traders looking to invest in shares that are on their way up, and that is why many a time you will see traders hiring analysts.
The 4 different kinds of charts in use in the trading industry are:
a. Line Charts,
b. Bar Charts,
c. Candle Stick Charts
d. Point and Figure Charts.
1. Line Charts – The line graphs are generally the simplest to make, and to interpret as well. They are made by connecting price points of the shares over a time periods on the other axis as mentioned earlier. The price points are normally selected from closing prices of the stock. Investors tend to prioritize the closing price, since it gives uniformity to the analysis and does not allow fluctuations to affect their judgment.
2. Bar Charts – They are a series of high and low lines that are used to depict the rise and fall in stock prices. They are the easiest to read, and they are color coded, making them very effective as well.
3. Candlestick Chart – This was first used in Japan by a successful silk trader hundreds of years ago. It can be made on a daily basis, or using intraday prices or even a weekly basis, long term.
4. Point And Figure Chart – This is one that is purely price based, and not time based. Although the x axis is present, it is not given importance as in other graphs.
Every kind of graph you may use has its own pros and cons, and there is a lot of variety to choose from as well. So don’t try to achieve your result from the same kind of graph, move on to others to save time. Make sure you have at least three or four versions of graphs at your disposal.
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