The two most commonly used charts in technical
analysis are the bar chart, and the point and figure chart. There are many
technical studies that can be added to these charts such as trend lines, moving
averages and stochastics (probabilities).
use a vertical bar to record the high and low range of a price for each market
day. The length of the bar indicates the range between the highest and lowest
quotations. The vertical line is crossed by a small horizontal line at the
closing price level. Therefore, in just one line per day it is possible to show
the closing price as well as the minimum and maximum quotations registered for
that day. A record is made daily, forming a pattern that may cover several
weeks, months or even years.Some chartists insist that a new bar chart should be
started as soon as a new futures position is opened. However, it is common to
continue the original chart with the new position following the position that
has just expired. As the new position may have discounts or premiums in relation
to the old position, the chart should be clearly marked to indicate where the
new position starts and where the old position ends.
plotting can be done in various ways. One way is to show the first
position until it expires and then to continue with the new first position.
Another way is to show only one position until it expires and then to continue
with the same month of the following year. The drawback of the second method is
that once a position expires, e.g. in December 2004, and the next position taken
is December 2005, prices may have changed significantly and the chart may
therefore show either a large increase or decrease.
lines on charts reveal significant trend changes but obscure subtle
changes in supply and demand factors. The trend line is best suited for
recording long-term changes in indices or other financial and economic data. The
market registers three types of trends: a bullish trend when prices are rising,
a bearish trend when prices are falling, and a steady or lateral trend when
prices are neither rising nor falling. A steady trend sustained for a
comparatively long period is known as a congestion
area. The larger this area, the greater the possibility that the market
will begin a definite trend, either bullish or bearish.
The simplest patterns to recognize are those formed
by the three types of trend lines. These are: the support line, which is drawn
to connect the bottom points of a price move; the resistance line, which is
drawn across the peaks of a trend; and the channel, which is the area between
the support and resistance lines that contains a sustained price move.
The point and
figure chart differs from the bar chart in two important respects.
First, it ignores the passage of time. Unlike a bar chart, where lines are
equidistant to mark distinct time periods, each column of the point and figure
chart can represent any length of time. Second, the volume of trade is
unimportant as it is thought merely to reflect price action and to contain no
predictive importance. The measurement of change in price direction alone
determines the pattern of the chart. The assumptions underlying the point and
figure chart primarily concern the price of a commodity. It is assumed that the
price, at any given time, is the commodity's correct valuation up to the instant
the contract is closed. This price is the consensus of all buyers and sellers in
the world and is the result of all the forces governing the laws of supply and
Moreover, no other information needs to be included
in this chart because the price is assumed to reflect all the essential
information on the commodity.
Real time and delayed charts can be obtained from
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charts are offered free of charge by www.futures.tradingcharts.com and are easy to