Types of Charts in Stock Market Explained

Stock price movements, when visualised on charts, create patterns that help technical analysts uncover trading opportunities. These patterns aren’t just limited to prices. Volume data can also be plotted to add context to trends and momentum. 

Charts are visual tools that represent price and volume data over time, simplifying the analysis of formations, trends, and breakouts. With the rise of platforms like m.Stock, accessing such charting tools has become easier than ever. Some brokers even provide them for free when you open an account. 

The true strength of charts lies in their ability to present price action across different timeframes. Whether you are analysing daily fluctuations or long-term movements, charts reveal how stock prices behave during specific events. Moreover, charts help gauge volatility and can be used by not just technical traders, but also fundamental investors for better timing of entries and exits. 

Prices are plotted on the Y-axis, while time intervals sit on the X-axis, displayed either in a linear or logarithmic scale depending on the level of detail required.  

Types of Charts 

1. Line Charts 

Line charts are the most straightforward of all chart types. They use only the closing prices to create a connected series of points over a defined period. Their simplicity makes them ideal for identifying general market trends with minimal distraction. 

• Strengths: Easy to read, great for long-term trend observation 

• Limitations: Lack of information on intraday highs/lows or price ranges 

They are not suitable for intraday trading but work well when comparing multiple stock performances over time.

2. Bar Charts (OHLC Charts) 

Bar charts, also called Open-High-Low-Close (OHLC) charts, represent price behavior in a more detailed manner. Each vertical line shows the high and low of a period, while short horizontal lines on either side indicate the open (left) and close (right) prices. 

• Top of bar = Day’s high 

• Bottom of bar = Day’s low 

• Left tick = Opening price 

• Right tick = Closing price

Color cues: 

• Green/Blue bar: Current closing price is higher than previous 

• Red bar: Current closing is lower than previous 

• If the close remains unchanged, the bar retains the previous color 

Bar charts provide a clearer view of price ranges, making them more suited for traders than line charts. 

3. Candlestick Charts 

Candlestick charting, originating from 18th-century Japanese rice markets, is one of the most widely used techniques by today’s traders. 

Each candlestick reflects: 

• Open and close prices (thick body) 

• High and low prices (thin wicks or shadows) 

Color Interpretation: 

• Green (bullish): Close > Open 

• Red (bearish): Close < Open 

• Same color as previous candle: If Open = Close

The upper wick reflects the day’s high, and the lower wick shows the low. Beyond basic patterns, candlesticks reveal market psychology through distinct formations.

Common Single Candle Patterns: 

• Doji 

• Hammer 

• Hanging Man 

• Shooting Star 

• Marubozu 

Multi-Candle Reversal Patterns: 

• Engulfing 

• Harami 

• Morning/Evening Star 

• Three White Soldiers / Three Black Crows 

These formations are powerful indicators of trend reversals or continuations and are heavily relied upon in technical setups.

4. Other Chart Types (Noiseless Charts) 

While line, bar, and candlestick charts dominate usage, other chart types help filter market noise and emphasise meaningful price movements. These include:

a. Renko Charts 

Renko charts ignore time and focus purely on price movement. Each brick represents a specific value (e.g., 10 points). A new brick is added only when the price moves by that predefined amount, making the chart ideal for identifying clear trends and ignoring minor fluctuations.

 b. Point & Figure Charts 

Among the oldest charting styles, Point & Figure charts plot Xs and Os to represent rising and falling prices respectively. Each X or O is added only after the price moves by a specific box size, such as 10 points. Unlike most charts, this format completely disregards time and is focused solely on price action. 

c. Heikin Ashi Charts 

Heikin Ashi, translating to “average pace” in Japanese, smooths out volatility by averaging both current and previous data points. It modifies standard OHLC data to produce candles that are more consistent and less noisy. 

How it works: 

• Open = Average of previous candle’s open and close 

• Close = Average of current OHLC values 

• High/Low = Derived from combinations of highs and lows of current/previous candles 

The result is a more fluid chart where green/red streaks last longer, aiding trend-followers in decision-making. 

Points to Remember 

• Charts are essential tools for traders and investors to visualize and analyze stock price behavior over different periods 

• Candlestick charts provide more detail and are the most commonly used format among technical traders 

• Noiseless charts such as Renko, Point & Figure, and Heikin Ashi help simplify complex market data by filtering minor price movements