There are three different sorts of charts used by technical analysts in stock trading.

1. Bar charts are the mainstay amongst investors and traditional traders. They’re sometimes called OHLC charts, which stands for open-high-low-close, or Western charts, as they were first developed and used in that hemisphere and remain most popular there.

As mentioned above, bar charts mark the four major price points a stock touches during the trading day: the opening price, the highest and lowest points reached, and the price at which the stock closes. The high and low determine the length of the bar from top to bottom, while the open is the small horizontal bar on the left and the close is the one on the right. Below is an example of a bar chart:

Bar charts provide all the information necessary for making trading decisions. However, that information isn’t always immediately clear. The relationships between the open and close, in particular, can become lost in the mix, which explains the current and increasingly popularity of candlestick charts.

2. Candlestick charts were developed in Japan and have rapidly risen to prominence amongst traders. The information they present is no different from that provided by bar charts, but the method of presentation is so much more effective that the chart becomes a graphical user interface between the trader and the stock, allowing traders to see through the pricing data to the market psychology underneath.

There are two parts to a price candle. The solid part, called the body or real body, represents the range between the open and close, while the “wicks” on top and underneath show the distance reached by the high and low.

On an up or bullish day, the share price closes higher than it opened. These candles are coloured white or left clear by most charting programs. Conversely, on a down or bearish day, the share price closes lower than it opened. These candles are coloured black, red, or some other shade to distinguish them from the up days; the example shown uses blue. If the price opens and closes at the same level, the candle has no real body, merely a horizontal line to mark the spot.

Below is the same chart, translated into candlesticks:

Candlestick charts provide an enormous amount of data within a relatively small bit of space. Sometimes it’s too much data, with the details drowning out the overall picture. When all that’s needed is a quick clear glimpse of the price action, a line chart is best.

3. Line charts are sometimes called mountain charts, as they resemble a series of peaks and valleys on the horizon. The line forming the chart connects the closing price from one time period to the next, providing a clear overview of the price action. Below is the same chart yet again:

Deciding which type of chart best suits one’s needs and preferences is often the first step taken as a trader

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