Line charts are a straight line charting format that uses only one price point. Line charts are ideal for finding intraday support levels for momentum, swing, and day trading stop losses on stocks. By using intraday line charts, a trader can keep a much tighter profit stop and trade stocks for greater financial gain. Line charts also provide a simple straight forward view of long term price action for stocks and indexes.

However, line charts should not be used for entry or exit signals. And they should not be used for daily price evaluation for swing, position, and options players. Candlesticks are the better choice for these styles of trading.

In many ways, line charts are similar to indicators in that you are looking at a straight line of price action. As you can see in the above chart, there were times when this stock moved up sharply to form peaks and times when it moved in a sideways choppy pattern. Understanding what these patterns mean will give you sufficient knowledge to trade stocks successfully.

Bar charts were the standard charting format for Western Technical Analysts for many decades. Bar charts usually represent 4 price points for each bar: the open, close, high, and low prices for that time period. This gives the analyst far more information than a line chart. Bar charts were designed for a market that is very different than the market we have today. Today, the stock market is dominated by institutional traders who trade stocks short term for quick profits. That means that daily charts and intraday charts are used to evaluate the short term move of stocks. But bar charts are not easy to read quickly and a trader can often make visual mistakes with bar charts. Since the late 90s, more and more professional traders and technical analysts have started to use candlestick charts for price analysis of stocks. Candlestick charts are far easier to read and allow a faster analysis of price patterns.

You can compare the above Bar chart to an example of a candlestick chart Can you tell if the stock closed higher or lower on this bar chart? Now go to the candlestick chart page and study that chart. You will see the inherent visual differences in each type of chart.

Bar charts are still used for very long term holds and some intermediate term holds where daily price action is not a critical factor. TechniTrader® recommends using candlestick charts for swing trading, position trading, options plays, and other short term trading. Long term and mutual fund investors can use bar charts if they are studying the price action of stocks over several years.

Point and Figure charts are one of the oldest western versions of stock charts. Point and Figure charts were popular back in the days when there were no computers and no charting programs for stocks. All market data was compiled by hand from the ticker tapes and then a point and figure chart was manually written every single market day. It took many hours of work for each chart. Today, charting programs allow individuals to trade stocks more efficiently and Point and Figure charts are not as useful.

The concept of Point and Figure Charts is unique among charting types as it is the only one that does not take time into consideration. Therefore the view of a point and figure chart is often over an extended period of time. The most popular Point and Figure Charts today are the 3 point reversal system. Point and Figure charting has, for the most part, been replaced by bar charts and candlestick charting. However, if you struggle with reading and interpreting charts then point and figure may be a chart type to consider. Point and Figure is typically for a longer term hold trading style and is not normally used for day, momentum or swing trading. John Murphy's Stock Charts web site features computer generated point and figure charts at no cost.