InvestorQ : Who should use line charts, bar charts and candlestick charts?
Mahil Khan made post

Who should use line charts, bar charts and candlestick charts?

Answer
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Jignesh Gupta answered.
1 year ago


Each chart pattern has its own utility. A line chart is very useful to capture long term to medium term trends. Since line charts consider only the closing price, they ignore the short term noise in the form of intraday volatility. This makes them better suited to get a clear medium to long term trend. Structurally, the bar charts and the candlesticks are largely similar and the candlesticks are an improved version in terms of the presentation and use of visuals. These charts are better suited to intraday traders and to short term traders who can scalp trends for the short term. There are many different types of charts available, and one is not necessarily better than the next. The data may be the same to create the chart but the way it is presented and interpreted will vary. Each approach will essentially have its own benefits and as well as drawbacks. You can choose any type or use multiple types of charts for analysis; it depends on your personal preferences and investing styles. The idea is to use the right type of charting tool for the particular need. The typical process is to get an idea of the larger trend through the line charts and then get into granular trends based on the bar charts or the candlesticks. There is not much of manual effort required in these. There are ready made software packages that can help you create very elegant charts depending on your needs and using the appropriate colour combinations. Your job is just to read the trend, interpret and then trade accordingly.