Chapter 2: Charts
Charting is the backbone of technical analysis, and many types of charts are used. In this chapter I’ll describe the charts that are commonly used and the advantages and limitations of each one.
Because technical analysis is all about price action, the chart you’ll most often want to look at is a price chart. In this type of chart price is shown on the y axis and time is shown on the x axis, as shown in figure 2.1 (overleaf).
The price scale is usually linear; that is, the distance between each division is the same. For example, the distance between 1 and 2 is the same as the distance between 2 and 3, and so on. Another option is to use a logarithmic price scale, and in this scale the distance between ...