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Charts

The price chart is your road map, your primary trading tool. Charts come in different flavors, from point and figure to Japanese candlestick and the most popular, the bar chart.

Most of you are no doubt familiar with bar charts. Although they're fairly easy to construct, they are not always that easy to analyze for maximum profitability. The bar chart can be in any time frame the trader prefers. The day trader might use a five-minute time frame, whereas the long-term “position trader” might use a monthly time frame. All the charts are constructed basically the same way; the most popular is the daily bar chart. On a daily bar chart, each day is plotted as a vertical line (or bar), with the range of the day's trading represented by the length of the bar. In other words, the top point of the bar is the day's high, and the low point is the day's low. On a standard bar chart, the horizontal axis measures time, and the vertical axis measures price. A small horizontal “tick mark” (or “flag”) is plotted on each daily bar “waving” to the right to indicate the closing price. Some bar charts also reflect the open via a small horizontal flag (or tic mark) plotted on each daily bar waving to the left.


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