There are several ways to draw a price chart, and each one shows the market in a slightly different light. Most traders use candlestick charts, but line and bar charts are just as valid, and a few specialist charts can help filter out noise. Here is a plain-English guide to the main types.
The three main chart types
- Line charts join up the closing prices. They are simple, clean and good for seeing the long-term trend.
- Bar charts show the open, high, low and close of each period as a vertical bar with two ticks.
- Candlestick charts show the same four prices, with a filled body between the open and close. They make it easy to see who won each session. Our candlestick patterns guide covers how to read them.
On all three, price runs up the side (the vertical axis) and time runs along the bottom (the horizontal axis).
Charts that filter out noise
- Heikin Ashi charts use averaged prices to smooth out candles. Trends look cleaner, but the prices shown are not the real traded prices.
- Point and figure charts ignore time altogether. They plot columns of Xs for rising prices and Os for falling prices, and only add a new mark when the price moves by a set amount.
- Renko charts draw a new brick only when the price moves a fixed amount. Like point and figure, they ignore time and small moves.
- Kagi and three line break charts are other time-free charts that change direction only after a set reversal.
Volume-based charts
Equivolume and candlevolume charts make each bar or candle wider when volume is higher, so you can see at a glance which moves had real weight behind them. Most traders simply add a volume panel under a normal chart instead.
Which chart should you use?
For most traders, candlesticks are the best all-round choice. Use a line chart when you want the big picture, and try Heikin Ashi or point and figure if you find normal charts too noisy. Whatever you choose, make sure you understand what the chart is and is not showing. For example, a Heikin Ashi close is not the real closing price, so it should not be used to set stops.
Related guides
This guide is for education only and is not financial advice. Trading carries risk; you can lose more than you expect.