Charts are the language of technical analysis.
They visually represent how prices move over time and help market participants understand trends, momentum, and market behavior at a glance. While charts may look complex initially, they all aim to answer one simple question:
What has price done in the past, and how is it behaving now?
This lesson focuses on understanding different types of charts — from basic to advanced — and how to use them responsibly.
Why Charts Matter in Technical Analysis
Charts help you:
- Visualize price movement clearly
- Identify trends and ranges
- Spot key price levels
- Understand buyer and seller behavior
- Reduce emotional decision-making
📌 Charts do not predict the future — they provide structure and context.
Visual Example: Same Price, Different View
Example: Assume a stock moves from ₹100 to ₹160 over one year.
- A line chart shows a smooth upward slope
- A candlestick chart shows multiple rallies, pullbacks, and pauses
📌 The destination may look the same, but the journey looks very different on charts.
(Suggested image: Line chart vs Candlestick chart for the same stock)
Charts help you:
- Visualize price movement clearly
- Identify trends and ranges
- Spot key price levels
- Understand buyer and seller behavior
- Reduce emotional decision-making
📌 Charts do not predict the future — they provide structure and context.
The Three Most Common Types of Stock Charts
All charts display price over time, but the way they present information differs.
1️⃣ Line Chart (Best for Absolute Beginners)
A line chart connects the closing prices of an asset over a chosen timeframe.
How a Line Chart Looks
- One continuous line
- Each point represents a closing price
(Suggested image: Simple line chart showing a gradual uptrend)
Practical Example
If a stock closes at:
- Monday: ₹100
- Tuesday: ₹102
- Wednesday: ₹101
The line chart simply connects these closing prices.
When to Use Line Charts
- Understanding long-term trends
- Getting a broad market view
- Early-stage learning
📌 Limitation: You cannot see intraday volatility or price rejection.
A line chart connects the closing prices of an asset over a chosen timeframe.
Key Characteristics
- Uses only one data point per period (closing price)
- Smooth and easy to read
- Filters out intraday noise
When to Use Line Charts
- Understanding long-term trends
- Getting a broad market view
- Early-stage learning
📌 Limitation: You cannot see price volatility within the period.
2️⃣ Bar Chart (More Detail, Less Popular Today)
A bar chart shows four key prices for each period:
- Open
- High
- Low
- Close
(Suggested image: Single bar with labels for Open, High, Low, Close)
How to Read a Bar
- Vertical line → high to low
- Left tick → opening price
- Right tick → closing price
Practical Insight
Bar charts show volatility and direction, but require practice to read quickly.
📌 Limitation: Information-rich but visually less intuitive for beginners.
A bar chart shows four key prices:
- Open
- High
- Low
- Close
Each bar represents one time period.
What a Bar Shows
- Vertical line → high to low
- Left tick → opening price
- Right tick → closing price
Who Uses Bar Charts
- Experienced traders
- Analysts trained in classical charting
📌 Limitation: Bar charts are information-rich but visually less intuitive for beginners.
3️⃣ Candlestick Chart (Most Widely Used)
Candlestick charts display the same data as bar charts, but in a visually intuitive format.
(Suggested image: Green and red candlesticks with labeled body and wicks)
Anatomy of a Candlestick
- Body → difference between open and close
- Upper wick → highest price
- Lower wick → lowest price
Practical Example
- Long green body → strong buying pressure
- Long upper wick → price rejection from higher levels
- Small body with long wicks → indecision
📌 Candlesticks visually reflect market psychology.
Candlestick charts are the most popular chart type globally.
They show the same information as bar charts but in a visually intuitive format.
Anatomy of a Candlestick
- Body → difference between open and close
- Wicks (shadows) → high and low
What Candlesticks Reveal
- Strength of buyers vs sellers
- Market indecision
- Momentum and reversals
📌 Candlesticks reflect market psychology, not just price.
Candlestick Colors (Simple Explanation)
- Green / White candle → price closed higher than it opened
- Red / Black candle → price closed lower than it opened
📌 Color is visual aid — structure matters more than color.
Timeframes and Charts
Charts behave differently across timeframes.
Example: Same Stock, Different Timeframes
- 5‑minute chart → noise, fast swings
- Daily chart → trends and structure
- Weekly chart → long-term direction
(Suggested image: Same stock shown on 5‑min, daily, and weekly charts)
📌 Always choose timeframe based on your goal — not excitement.
Charts change behavior based on timeframe:
- Short timeframes → more noise, faster decisions
- Long timeframes → smoother trends, stronger signals
📌 The same chart pattern may have different meanings on different timeframes.
Choosing the Right Chart Type
| Goal | Recommended Chart |
|---|---|
| Market overview | Line Chart |
| Price structure | Candlestick Chart |
| Classical analysis | Bar Chart |
📌 Most traders eventually use candlestick charts as their primary tool.
Common Beginner Mistakes
❌ Memorizing candlestick patterns without context ❌ Ignoring trends and higher timeframes ❌ Constantly switching chart types
✔ Focus on price structure first ✔ Keep charts clean ✔ One chart type is enough
❌ Jumping to candlestick patterns without understanding trends ❌ Using too many chart types at once ❌ Switching charts frequently due to confusion
✔ Start simple → build gradually
Advanced Insight (For Intermediate & Experts)
Professional traders focus less on individual candles and more on:
- Price structure
- Swing highs and lows
- Location of candles relative to trends and key levels
📌 Context matters more than patterns.
Key Takeaways from Lesson 3
- Charts visualize price behavior
- Line charts offer simplicity
- Bar charts offer structure
- Candlestick charts offer insight into psychology
- No chart predicts the future
What’s Next?
Now that you understand how price is displayed on charts, the next step is to understand direction.
👉 Proceed to Lesson 4 – Trends and Trendlines
👈 Go Back to Technical Analysis Basics