Use Line and Bar Charts

Line charts and bar charts help you focus on price changes.

Line and bar charts are often used to represent price action (price changes during individual periods as well as over multiple periods in the timeframe you’re evaluating) over daily, weekly, monthly, or custom time periods. Line charts are the ultimate in simplicity, graphing daily closing prices and nothing more. Line charts are the only option for analyzing investments that have only a closing price, such as mutual funds. Bar charts display a fair amount of price action while remaining easy on the eyes, but they can show opening, closing, high, and low prices. By using simple line and bar charts, you can narrow in on basic trends. Technical analysis web sites and standalone software applications make it easy to create these charts regardless of the combination of options you choose.

Line Charts

Line charts are made up of simple lines that typically connect closing prices over a predetermined period. Many technical analysts consider closing prices to be the most important price metric and see no need to clutter the line chart with other price information. Analysts who favor line charts find them easier to interpret because they ignore intraday price fluctuations and focus on the end-of-day status of the running battle between the bulls and the bears. For technical analysts who draw their own charts from daily newspaper data or for those who follow mutual funds, which only publish closing prices, ...

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