What Are Charts?

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chart_analysis:what_are_charts [2019/06/24 19:38]
127.0.0.1 external edit
chart_analysis:what_are_charts [2021/09/24 23:47] (current)
betseyp
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 A price chart is a sequence of prices plotted over a specific timeframe. In statistical terms, charts are referred to as time series plots. A price chart is a sequence of prices plotted over a specific timeframe. In statistical terms, charts are referred to as time series plots.
  
-{{:​chart_analysis:​what_are_charts:​charts-1ibm.png|International Business Machines (IBM) example chart from StockCharts.com}}+{{:​chart_analysis:​what_are_charts:​charts-basic.png}}
  
-On the chart, the y-axis (vertical axis) represents the price scale and the x-axis (horizontal axis) represents the time scale. Prices are plotted from left to right across the x-axis, with the most recent plot being the furthest right. The price plot for IBM extends from January 11999 to March 132000+On the chart, the y-axis (vertical axis) represents the price scale and the x-axis (horizontal axis) represents the time scale. Prices are plotted from left to right across the x-axis, with the most recent plot being the furthest right. The price plot for GE extends from August 242018 to August 242021
  
 Technicians,​ technical analysts and chartists use charts to analyze a wide array of securities and forecast future price movements. The word "​security"​ refers to any tradable financial instrument or quantifiable index such as stocks, bonds, commodities,​ futures or market indices. Any security with price data over a period of time can be used to form a chart for analysis. ​ Technicians,​ technical analysts and chartists use charts to analyze a wide array of securities and forecast future price movements. The word "​security"​ refers to any tradable financial instrument or quantifiable index such as stocks, bonds, commodities,​ futures or market indices. Any security with price data over a period of time can be used to form a chart for analysis. ​
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 The timeframe used for forming a chart depends on the compression of the data: intraday, daily, weekly, monthly, quarterly or annual data. The less compressed the data is, the more detail is displayed. The timeframe used for forming a chart depends on the compression of the data: intraday, daily, weekly, monthly, quarterly or annual data. The less compressed the data is, the more detail is displayed.
  
-{{:​chart_analysis:​what_are_charts:​charts-2ibm.png|International Business Machines (IBM) timeframe example chart from StockCharts.com}}+{{:​chart_analysis:​what_are_charts:​charts-daily.png}} 
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 +{{:​chart_analysis:​what_are_charts:​charts-weekly.png}}
  
 Daily data is made up of intraday data that has been compressed to show each day as a single data point, or period. Weekly data is made up of daily data that has been compressed to show each week as a single data point. The difference in detail can be seen with the daily and weekly chart comparison above. 100 data points (or periods) on the daily chart is equal to the last 5 months of the weekly chart, which is shown by the data marked in the rectangle. The more the data is compressed, the longer the timeframe possible for displaying the data. If the chart can display 100 data points, a weekly chart will hold 100 weeks (almost 2 years). A daily chart that displays 100 days would represent about 5 months. There are about 20 trading days in a month and about 252 trading days in a year. The choice of data compression and timeframe depends on the data available and your trading or investing style. Daily data is made up of intraday data that has been compressed to show each day as a single data point, or period. Weekly data is made up of daily data that has been compressed to show each week as a single data point. The difference in detail can be seen with the daily and weekly chart comparison above. 100 data points (or periods) on the daily chart is equal to the last 5 months of the weekly chart, which is shown by the data marked in the rectangle. The more the data is compressed, the longer the timeframe possible for displaying the data. If the chart can display 100 data points, a weekly chart will hold 100 weeks (almost 2 years). A daily chart that displays 100 days would represent about 5 months. There are about 20 trading days in a month and about 252 trading days in a year. The choice of data compression and timeframe depends on the data available and your trading or investing style.
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 ==== Line Chart ==== ==== Line Chart ====
  
-{{:​chart_analysis:​what_are_charts:​charts-3sunw-c.png|Sun Microsystems,​ Inc. (SUNW) line chart example chart from StockCharts.com}}+{{:​chart_analysis:​what_are_charts:​charts-line.png}}
  
 Some investors and traders consider the closing level to be more important than the open, high or low. By paying attention to only the close, intraday swings can be ignored. Line charts are also used when open, high and low data points are not available. Sometimes only closing data are available for certain indices, thinly-traded stocks, and intraday prices. Some investors and traders consider the closing level to be more important than the open, high or low. By paying attention to only the close, intraday swings can be ignored. Line charts are also used when open, high and low data points are not available. Sometimes only closing data are available for certain indices, thinly-traded stocks, and intraday prices.
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 Perhaps the most popular charting method is the bar chart. The high, low and close are required to form the price plot for each period of a bar chart. The high and low are represented by the top and bottom of the vertical bar and the close is the short horizontal line crossing the vertical bar. On a daily chart, each bar represents the high, low and close for a particular day. Weekly charts would have a bar for each week based on Friday'​s close and the high and low for that week. Perhaps the most popular charting method is the bar chart. The high, low and close are required to form the price plot for each period of a bar chart. The high and low are represented by the top and bottom of the vertical bar and the close is the short horizontal line crossing the vertical bar. On a daily chart, each bar represents the high, low and close for a particular day. Weekly charts would have a bar for each week based on Friday'​s close and the high and low for that week.
  
-{{:​chart_analysis:​what_are_charts:​charts-4sunw-hlc.png|Sun Microsystems,​ Inc. (SUNW) bar chart example chart from StockCharts.com}}+{{:​chart_analysis:​what_are_charts:​charts-hlc.png}}
  
 Bar charts can also be displayed using the open, high, low and close. The only difference is the addition of the open price, which is displayed as a short horizontal line extending to the left of the bar. Whether or not a bar chart includes the open depends on the data available. Bar charts can also be displayed using the open, high, low and close. The only difference is the addition of the open price, which is displayed as a short horizontal line extending to the left of the bar. Whether or not a bar chart includes the open depends on the data available.
  
-{{:​chart_analysis:​what_are_charts:​charts-5sunw-ohlc.png|Sun Microsystems,​ Inc. (SUNW) bar chart example chart from StockCharts.com}}+{{:​chart_analysis:​what_are_charts:​charts-ohlc.png}}
  
 Bar charts can be effective for displaying a large amount of data. Using candlesticks,​ 200 data points can take up a lot of room, resulting in a cluttered chart. Line charts show less clutter, but do not offer as much detail (no high-low range). The individual bars that make up the bar chart are relatively skinny, which allows users the ability to fit more bars while keeping the chart comparatively neat. If you are not interested in the opening price, bar charts are an ideal method for analyzing the close relative to the high and low. In addition, bar charts that include the open will tend to become cluttered more quickly. If you are interested in the opening price, candlestick charts probably offer a better alternative. Bar charts can be effective for displaying a large amount of data. Using candlesticks,​ 200 data points can take up a lot of room, resulting in a cluttered chart. Line charts show less clutter, but do not offer as much detail (no high-low range). The individual bars that make up the bar chart are relatively skinny, which allows users the ability to fit more bars while keeping the chart comparatively neat. If you are not interested in the opening price, bar charts are an ideal method for analyzing the close relative to the high and low. In addition, bar charts that include the open will tend to become cluttered more quickly. If you are interested in the opening price, candlestick charts probably offer a better alternative.
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 Originating in Japan over 300 years ago, candlestick charts have become quite popular in recent years. For a candlestick chart, the open, high, low and close are all required. A daily candlestick is based on the open price, the intraday high and low, and the close. A weekly candlestick is based on Monday'​s open, the weekly high-low range and Friday'​s close. Originating in Japan over 300 years ago, candlestick charts have become quite popular in recent years. For a candlestick chart, the open, high, low and close are all required. A daily candlestick is based on the open price, the intraday high and low, and the close. A weekly candlestick is based on Monday'​s open, the weekly high-low range and Friday'​s close.
  
-{{:​chart_analysis:​what_are_charts:​charts-6sunw-cst.png|Sun Microsystems,​ Inc. (SUNW) ​candlestick ​chart example chart from StockCharts.com}}+{{:​chart_analysis:​what_are_charts:​charts-candleparts.png}} 
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 +{{:​chart_analysis:​what_are_charts:​charts-candlestick.png}}
  
 Many traders and investors believe that candlestick charts are easy to read, especially the relationship between the open and the close. Hollow candlesticks form when the close is higher than the open and filled candlesticks form when the close is lower than the open. The rectangular portion formed from the open and close is called the body (hollow body or filled body). The lines above and below are called shadows and represent the high and low. Many traders and investors believe that candlestick charts are easy to read, especially the relationship between the open and the close. Hollow candlesticks form when the close is higher than the open and filled candlesticks form when the close is lower than the open. The rectangular portion formed from the open and close is called the body (hollow body or filled body). The lines above and below are called shadows and represent the high and low.
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 All the charting methods shown above plot one data point for each period of time. No matter how much price movement occurred, each day or week represented is one point, bar, or candlestick along the time scale. Even if the price is unchanged from day to day or week to week, a dot, bar, or candlestick is plotted to mark the price action. Contrary to this methodology,​ point & figure charts are based solely on price movement, and do not take time into consideration. There is an x-axis, but it does not extend evenly across the chart. All the charting methods shown above plot one data point for each period of time. No matter how much price movement occurred, each day or week represented is one point, bar, or candlestick along the time scale. Even if the price is unchanged from day to day or week to week, a dot, bar, or candlestick is plotted to mark the price action. Contrary to this methodology,​ point & figure charts are based solely on price movement, and do not take time into consideration. There is an x-axis, but it does not extend evenly across the chart.
  
-{{:​chart_analysis:​what_are_charts:​charts-7pnf.gif|point & figure example chart from StockCharts.com}}+{{:​chart_analysis:​what_are_charts:​charts-pnf.png}}
  
 The beauty of point & figure charts is in their simplicity. Little or no price movement is deemed irrelevant and therefore not duplicated on the chart. Only price movements that exceed specified levels are recorded. This focus on price movement makes it easier to identify support and resistance levels, bullish breakouts and bearish breakdowns. [[:​chart_analysis:​pnf_charts|This P&F article]] has a more detailed explanation of point & figure charts. The beauty of point & figure charts is in their simplicity. Little or no price movement is deemed irrelevant and therefore not duplicated on the chart. Only price movements that exceed specified levels are recorded. This focus on price movement makes it easier to identify support and resistance levels, bullish breakouts and bearish breakdowns. [[:​chart_analysis:​pnf_charts|This P&F article]] has a more detailed explanation of point & figure charts.
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 A logarithmic scale, or log scale, measures price movements in percentage terms. An advance from 10 to 20 would represent an increase of 100%. An advance from 20 to 40 would also be 100%, as would an advance from 40 to 80. All three of these advances would appear as the same vertical distance on a log scale. Most charting programs refer to the log scale as a semi-log scale, because the time axis is still displayed arithmetically. ​ A logarithmic scale, or log scale, measures price movements in percentage terms. An advance from 10 to 20 would represent an increase of 100%. An advance from 20 to 40 would also be 100%, as would an advance from 40 to 80. All three of these advances would appear as the same vertical distance on a log scale. Most charting programs refer to the log scale as a semi-log scale, because the time axis is still displayed arithmetically. ​
  
-{{:​chart_analysis:​what_are_charts:​charts-8vrsn.png|Verisign, Inc(VRSN) price scaling example chart from StockCharts.com}}+{{:​chart_analysis:​what_are_charts:​charts-logscale.png}} 
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 +{{:​chart_analysis:​what_are_charts:​charts-arithscale.png}}
  
-The chart above uses the 4th-Quarter ​performance of VeriSign ​to illustrate the difference in scaling. On the log scale version, the distance between ​50 and 100 is the same as the distance between ​100 and 200. However, on the arithmetic scale, the distance between ​100 and 200 is significantly greater than the distance between ​50 and 100+The chart above uses the performance of Peloton ​to illustrate the difference in scaling. On the log scale version, the distance between ​20 and 40 is the same as the distance between ​40 and 80. However, on the arithmetic scale, the distance between ​40 and 80 is significantly greater than the distance between ​20 and 40
  
 Key points on the benefits of arithmetic scale charts include: Key points on the benefits of arithmetic scale charts include: