B. Type Of Charts

"All things come to those who wait"

There are many types of chart that commonly used by traders in the market, which are :

1. Line chart

Line chart is not the most popular trading charts, because of the limited trading information that they represent, but they are easy to read and interpret. Line charts consist of individual points, that are connected with straight lines. Usually, each point shows the close of the timeframe, but this can usually be modified to show any one of the open, high, or low. Line charts also show the direction of the timeframe.

If a line chart includes the close, it shows whether the timeframe was an upward timeframe (i.e. closed higher than it opened), or a downward timeframe (i.e. closed lower than it opened), but not in as much detail as either bar or candlestik charts, which include both the open and close. By not including the high and low, line charts do not show the range of the timeframe (i.e. the distance between the high and the low of the Line).

2. Bar chart

Bar chart is a chart that has been using by western for long time, this chart required to produce a standard bar chart consists of the open,high, low, and close prices for the time period under study. A bar chart consists of vertical lines representing the high to low range in prices for that day. The high price refers to the highest price that happened that day. Likewise, the low price refers to the lowest price traded that day.

3. Candlestick Chart

Candlestick chart is a most popular chart type in japan, using these candlesticks, Munehisa Homma become famous because he can use it to predict the price rice for the future by using the past price. This chart has been used for centuries. I like used candlesticks because this type of chart are so powerfull , flexible ( can be combinated with other indicators), and we can know the level of human psychology using this candlesticks. I have my own chapter about how to use japanese candlestick at the next chapter.

4. Three line break chart

The three line break chart is similar in concept to point and figure charts. The decision criteria for determining "reversals" are somewhat different. The three-line break chart looks like a series of rising and falling lines of varying heights.

For japanese traders this chart is described as "more subtle form point and figure charts where reversals are decided by the market and not by arbitrary rules. The Three Line Break Charts are actually Any Line Break Charts. They are not limited to just a three line reversal. You can create Two Line Break Charts, or even Eighteen Line Break Charts, if you wish. A major advantage of the three-line break chart is that there is no arbitrary fixed reversal amount. It is the market's action that will give the indication of a reversal. i will discuss how to use this chart at the next chapter.

5. Renko chart

The Renko chart is a trend following technique. It has acquired its name from a Japanese word "renga" meaning bricks. The renko charts looks similar to the three-bar breakchart since they both have lines that look like blocks.

The trend reversals are indicated by the appearance of a white or black brick. A black brick indicates a new downward trend and white brick indicates a new upward trend. There are situations where Renko charts produce whipsaws, giving indications of short-lived trends near the end. The expectation with a trend following technique is that it allows to ride the major portion of significant trends. The renko chart uses closing prices. The first step is to choose a price range unit. This price range point is the minimum amount the market must move before a renko brick is drawn. The price range point also serves to set the height of the brick. Thus, a five-point renko chart would have bricks that are five points tall.

An important aspect of the renko chart is that rising lines are denoted by equal size white bricks and falling lines are denoted by equal size black bricks. Thus, no matter how large the move, it is shown on the renko chart as equal sized bricks. I will discuss how to use this chart at the next chapter.


6. Kagi chart

The Kagi chart is used for tracking price movements and to make decisions on purchasing stock. It differs from traditional stock charts, such as the Candlestick chart by being mostly independent of time. This feature aids in producing a chart that reduces random noise. Due to its effectiveness in showing a clear path of price movements, the Kagi chart is one of the various charts that investors use to make better decision on the stocks. The most important benefit of this chart is that it is independent of time and change of direction occurs only when a specific amount is reached.

There are many ways to use kagi charts, but the most basic is to buy when the kagi line goes from thin to thick, and to sell when the kagi line changes from thick to thin. Remember that the kagi line becomes thick (i.e., becomes a yang line) when the prior high is exceeded. The kagi line converts to a thin yin line when a prior low is broken.

Kagi charts look similar to swing charts and do not have a time axis. A Kagi chart is created with a series of vertical lines connected by short horizontal lines. The thickness and direction of the lines is based on the price of the underlying stock or asset, as follows:

1. The thickness of the line changes when the price reaches the high or low of the previous vertical line.

2. The direction of the line changes when the price reaches a preset reversal amount, which is usually set at 4%. When a direction change occurs, a short horizontal line is drawn between the lines of opposite direction.

I also will discuss how to read and profit using kagi chart at the next chapter.