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The daily bar chart has already been acknowledged as the most widely used type of chart in technical analysis. There are, however, other types of charts also used by technicians, such as line charts, point and figure charts, and more recently, candlesticks. Figure 3.1 shows a standard daily bar chart. It's called a bar chart because each day's range is represented by a vertical bar. The bar chart shows the open, high, low, and closing prices. The tic to the right of the vertical bar is the closing price. The opening price is the tic to the left of the bar.
Figure 3.2 shows what the same market looks like on a line chart. In the line chart, only the closing price is plotted for each successive day. Many chartists believe that because the closing price is the most critical price of the trading day, a line (or close-only) chart is a more valid measure of price activity.
Figure 3.1 A daily bar chart of Intel. Each vertical bar represents one day's action.
Figure 3.2 A line chart of Intel. This type of chart produces a solid line by connecting the successive closing prices.
A third type of chart, the point and figure chart, is shown in Figure 3.3 . Notice here that the point and figure chart shows the same price action but in a more compressed format. Notice the alternating column of x's and o's. The x columns show rising prices and the o columns, declining prices. Buy and sell signals are more precise and easier to spot on the point and figure chart than on the bar chart. This type of chart also has a lot more flexibility. Chapter 11covers point and figure charts.