According to a senior financial analyst at Wilkins Finance, stock trading is great fun, full of adventure, risk, mind games, speculations and much more. People who invest in stock markets are great risk takers. They may choose a safe game or an aggressive one but in both conditions, they cannot eliminate the risk.
The stock markets often follow trends but this is not necessary all the time. Sometimes it might go through a sudden fall or rise, which may be the result of a dramatic change in the economy for any external reason. It is typical to analyze the stock market trends and thereare graphs of different types.
Types of trading graphs
There are typically four types of graphs in stock trading on the basis of which investors and traders forecast the future trends. These charts are helpful in providing them with the information which they are looking for and in this way they can easily determine their future goals.
These types of graphs are as follows–Point of figure charts, bar charts, line charts and candlestick charts. Each of these has their own value, specification and there is a proper method of reading them individually. Let’s have a detailed look at these.
The simplest form of chart in stock trading is the line chart. It only represents the closing prices of the stocks over the given period. It is called a line chart because it forms a line to show the closing prices of the stocks over the given time frame. This chart, however, doesn’t provide many details. This, however, is still beneficial for those who consider that the closing prices of the stock are more important as compared to the opening or trending prices. They are least noisy among all the graph types which are available instock trading.
Better than the line charts are bar charts. These bar charts provide many details. They have a collection of opening, high, low, trending and closing prices. It is a complete mix of the price trend that can help the trader to understand what is going on. This graph consists of vertical lines arranged in a particular order with horizontal dashes on both sides. The dash on the left sides represents the opening price whereas the dash on the right side is used to represent the closing price of the stock. A black color is used to present the rising period if the price at opening is lower than the price at closing and a red color is to represent the falling period if the price at opening is higher than the price at closing.
This type of graphical chart was has originated Japan and now it is considered as the most adaptable type of graph amongst investors and traders. This chart also possesses the set of verticals lines like the bar charts but the difference is that the bars are of rectangular shape or wider to represent the difference between the price at opening and the price upon closing. When there is a falling period, a typical red or black shaded candlestick body is used for the representation, whereas in the rising period, a white candlestick body is used to represent the rise. This is why it is named a candlestick graph chart.
Point of figure charts
Not very common in use, these charts are way too old but have a great historical background. This chart represents the stock trade irrespective of the volume and time frame. That is why it is used by just an average amount of investors and traders.
This chart consists of an “x” and “o” series, where “x” is to show the upward price trend and the “o” is to represent the lower stock market price trend. Numbers and letters are also present in the chart so that the traders may get anidea about the dates and months on the basis of which they might make the speculations.
In the stock trading graphs, these charts play a vital role. Every chart fulfills the requirements of different types of traders. By reading them, investors and traders design the future of the investments. They make speculations and understand the upcoming trends of the stock market.