Importance of Bar Charts

Bar charts are the most popular type of chart used in technical analysis because they are the easiest to create, interpret and maintain. A disadvantage of a bar chart is that it doesn’t show the interrelationships between activities. What a bar chart can be defined as is a visual account of price performance over any specified period of time to spot trends and patterns. A bar chart can be used to monitor the performance on stocks, bonds, options, indexes and futures across any time frame. The structure of a bar chart is explained as a vertical line connecting the high and low prices for the trading period. A short horizontal line is then drawn across the bar at the opening and closing price.
Structure of a Bar Chart

Charts are an important factor in technical analysis. Technical analysis is based on the idea that to know where stock prices are going, you must know where they have been. With that being said, then by recording the stocks past information, a technical analyst believes charts will help them to analyze future price movements. The idea is that prices tend to move in trends then the past price movement can give clues to the future direction of the trend. The analyst will look for that trend on the chart. With the chart, a technical analyst will be able to see the recorded information at a glance. It will then be up to the analyst to interpret the patterns that will become a profitable trade for them.

Popularity: 67% [?]

One Response to “Importance of Bar Charts”

1. Tony Says:
   April 3rd, 2010 at 4:06 am

   Always good to see, this was a brilliant article. In theory would like to be such a good writer too. You need time to creat that quality and additionally lots of effort to make such a brilliant article.

Leave a Reply