What are the different types of charts on eToro?
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It is no doubt that technical analysts hardly make any trading decisions without technical charts representing historic price, volume, and time intervals. It is, therefore, essential for you to learn different charts used in technical analysis.
Like most trading platforms, eToro provides traders five types of charts, including:
- Candlestick chart
- Hollow Candle chart
- Bar chart
- Line chart
- Mountain chart
Although these different charts are all created using the same price data, they display the data in different ways. This article will take you through the different types of charts available on eToro and their significance.
1. Candlestick chart
A candlestick chart represents the price movements of instruments over a certain time period. This type of chart is quite popular among traders because they are easy to read and understand.
A candlestick offers a wide range of information in a simple manner, including the high, low, open, and closing prices over a specific time frame. The trader can fix this time frame as per his requirement.
For example, if the time limit is fixed one day, then a new candlestick is created in the graph every day.
A candlestick is composed of a body and wicks (thin lines extending above and below the body).
- The “body” of each candlestick shows the opening and closing prices
- The candle “wicks” display the high and low prices for each period.
The color of the candlestick indicates whether the value of the asset rose or fell over the period. More specifically, the green candles reflect that price closed higher than where it opened (often called a bullish candle), and every candle that is red means the price closed lower than where it opened (often called a bearish candle).
A typical candlestick looks like this:
What makes the candlestick chart an improvement over others is that it provides the trader with more information while remaining easy to view at a glance. Hence, the candlestick chart is by far the most popular type of chart used in technical analysis.
2. Hollow candle chart
A hollow candle chart is similar to the Japanese candlestick chart, except for the candle’s color.
Hollow candlesticks use color and fill attributes to show price behavior. When a candle is solid, it means that the closing price is lower than the same period’s open price. When a candle is hollow, it means that the closing price is higher than the same period’s open price.
The thin lines on either end called wicks or shadows represent highs and lows.
3. Bar chart
Like the above charts, a bar chart reflects the price movement of a financial instrument. Each bar represents a specific interval of time.
Where:
- The vertical line is created by the high and low prices for the bar.
- The dash to the bar left was the opening price, and the dash to the right signals the closing price.
Traders may find bar charts hard to follow at first sight, but in essence, bar charts are quite straightforward to read and great for analysis.
By removing the color from the chart, traders can view the market sentiment (bullish/bearish) with an uncomplicated outlook, which especially benefits trend traders.
4. Line chart
Line charts are the most basic chart type. The charts typically display closing prices and nothing else. Each closing price is linked to the previous closing price to make a continuous line that is easy to follow.
Although the line chart provides less information than candlestick or bar charts, it is better for viewing at a glance for a simplistic market view. Price charts also help easily visualize a developing trend. This is done just by looking at the direction the line is taking.
In addition, the line chart can assist in managing the emotions of trading by eliminating ‘choppy’ movements in different colors as seen in the candlestick charts and selecting a neutral color like the blue chart depicted above.
5. Mountain chart
A mountain chart is a financial graph with peaks and dips, which makes it look like the side of a mountain. Mountain charts are essentially the same as line charts, but with the space below the line filled with color.
Like line charts, the chart is quite simple to digest market information quickly and appealingly as there are no complicated details to consider.
In conclusion, a technical chart is considered a valuable tool to help traders make informed decisions while making a financial commitment in the markets.
The selection of a trading chart is largely a matter of personal preference. The ease of reading and understanding should be put as a priority consideration. If you’re interested in experiencing the different chart types and understand their capabilities, use the demo account provided by eToro. And be sure to choose the chart that is suitable for your strategy and style. Happy trading!
Investiki.com
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