So how do you read charts and make sense of them? Some of the most popular charts you will encounter in trading are the following:
The line chart is the most basic and default chart type. Connecting real time data points with a line shows you the actual price of the asset. The line can give you a good idea and visual representation of how the price is changing over time. By choosing your own timeframe you can see the real time price of the asset at this moment or go back in historical closing prices.
The bar chart is also a commonly used chart type for experienced professional traders. In a bar chart, the price is not drawn into the chart in a line, but in many individual bars. Each bar summarizes all market movements of a certain time span. Traders usually use daily charts. This means one single bar of the bar chart represents one trading day. Other common time frames are hourly, 15 minutes or 30 seconds.
Compared to traditional bar charts, many traders consider candlestick charts more visually appealing and easier to interpret. Each candlestick provides an easy-to-decipher picture of price action. Immediately a trader can compare the relationship between the open and close as well as the high and low. The relationship between the open and close is considered vital information and forms the essence of candlesticks. Hollow candlesticks, where the close is greater than the open, indicate buying pressure. Filled candlesticks, where the close is less than the open, indicate selling pressure.