Line Chart
Candlefocus EditorTo create a line chart, data points representing the closing price of a stock, commodity, or other asset, over a given period of time, are connected by a single line. By using only closing prices in the chart, inherent market noise from less critical points, such as the open, high, and low prices, are reduced. Line charts then clearly show the asset’s price direction, whether it be an upward trend or a downward trend.
However, due to the simplified nature of line charts, they may not always accurately display a asset’s price momentum or provide insight into the larger price patterns. Further analysis may be necessary in order to gain additional knowledge about the asset’s pricing. Additionally, the thickness of the line used to depict the price movement may vary across different charting softwares and trading platforms.
Line charts are useful when tracking and analyzing average price history across a wide range of assets. Additionally, they can help to respond to dynamic market conditions, allowing investors to make timely decisions. In day trading, line charts are often used to strengthen technical analysis as a tool for helping to forecast future price movements.
In summary, line charts offer a simple and helpful way for tracking a asset’s price history. They provide a visually captivating at-a-glance view, clearly illustrating an assets’ price momentum. However, line charts have a major limitation; they cannot display all price patterns or trends accurately. This can be an issue for more experienced traders, who may need to look for clues beyond the line chart in order to create sound strategies.