InvestorQ : Can you explain what does a Line Chart mean in technical analysis and how is it interpreted?
Ria Roy made post

Can you explain what does a Line Chart mean in technical analysis and how is it interpreted?

Answer
user profile image
Mahil Khan answered.
1 year ago


Line chats are basically intended to give you an overall macro picture of the market or the big market trend as we call it. When you want get more granular into specific trends, you get into more complicated types of charts in technical analysis. This type of chart is usually used to get a “big picture” view of price movements. At a very basic level, the line chart is formed by connecting the closing prices over a specified time frame. You can look at the line chart over a month, half year, full year or even a number of years. Technical analysts as well as investors and traders consider the closing level to be more important than the open, high, or low. That is because the closing level shows the sum total of the full day factoring of news and cues into the price. On the other hand, the open, low and high either show volatile points or the extreme outliers of the day’s price. By paying attention to only the close, intraday swings can be ignored. This approach may not be very useful when you look at short term trading cues but is very useful if you want to delve into whether the stock is into a downtrend or an uptrend. Such cues are easily available in this approach.