9 Main Types of Trading Charts

In this article, we will explain the main types of trading charts, how they are built, and how they can be used for trading. We will also help you choose the best type of trading chart for your trading style, based on your goals, preferences, and risk tolerance.

The Main Types of Trading Charts

There are many types of trading charts, but the most common and popular ones are:

• Line charts
• Bar charts
• Candlestick charts
• Volume charts
• Tick charts
• Range bar charts
• Point and figure charts
• Renko charts
• Kagi charts

These types of trading charts can be classified into two broad categories: time-based charts and non-time-based charts.

Time-based charts are trading charts that use a fixed time interval to plot the price data. For example, a 5-minute chart shows the price data for every 5 minutes. Time-based charts are the most widely used and familiar type of trading charts, as they show the chronological sequence of price movements and the frequency of trading activity.

Non-time-based charts are trading charts that use other criteria than time to plot the price data. For example, a tick chart shows the price data for every transaction. Non-time-based charts are less common and more advanced type of trading charts, as they show the magnitude and direction of price movements and the intensity of trading activity.

Let's take a closer look at each type of trading chart and how they can be used for trading.

Line Charts

A line chart is the simplest and most basic type of trading chart. It is constructed by connecting the closing prices of each time interval with a line. A line chart shows the general direction and trend of the price movements over time, but it does not show the details of the price fluctuations within each time interval.

Pic. Line chart

A line chart is useful for:

• Identifying long-term trends and support and resistance levels
• Spotting chart patterns, such as triangles, wedges, and channels
• Filtering out the noise and focusing on the big picture

However, a line chart is limited by:

• Not showing the opening, high, and low prices of each time interval
• Not showing the trading volume and volatility of the market
• Not providing enough information for precise entry and exit points

Bar Charts

A bar chart is a more detailed and informative type of trading chart. It is constructed by using a vertical bar for each time interval to show the opening, high, low, and closing prices of the market. The top of the bar represents the highest price, the bottom of the bar represents the lowest price, and the horizontal lines on the left and right sides of the bar represent the opening and closing prices, respectively. A bar chart shows the range and direction of the price movements and the trading activity within each time interval.

Pic. Bar chart

A bar chart is useful for:

• Analyzing the price action and the market sentiment of the market
• Identifying the strength and weakness of the price movements and the trading activity
• Spotting bar patterns, such as pin bars, engulfing bars, and inside bars

However, a bar chart is limited by:

• Not showing the color and shape of the price movements and the trading activity
• Not showing the trading volume and volatility of the market
• Not being easy to read and interpret for beginners

Candlestick Charts

A candlestick chart is a more visual and expressive type of trading chart. It is constructed by using a candlestick for each time interval to show the opening, high, low, and closing prices of the market. The body of the candlestick represents the range between the opening and closing prices, and the shadows or wicks of the candlestick represent the range between the highest and lowest prices. The color and shape of the candlestick indicate the direction and magnitude of the price movements and the trading activity within each time interval. A candlestick chart shows the dynamics and psychology of the market participants and the market sentiment.

Pic. Candlestick chart

A candlestick chart is useful for:

• Displaying the price action and the market sentiment of the market in a more vivid and intuitive way
• Identifying the reversal and continuation signals of the price movements and the trading activity
• Spotting candlestick patterns, such as doji, hammer, shooting star, and morning star

However, a candlestick chart is limited by:

• Not showing the trading volume and volatility of the market
• Not being consistent and reliable in different market conditions and time frames
• Not being easy to memorize and recognize for beginners

Volume Charts

A volume chart is a type of trading chart that shows the trading volume of the market along with the price data. It is constructed by using a histogram or a bar chart below the price chart to show the number of contracts or shares traded within each time interval. The height of the histogram or the bar represents the trading volume, and the color of the histogram or the bar indicates the direction of the price movements. A volume chart shows the relationship and correlation between the price movements and the trading activity of the market.

Pic. Volume chart

A volume chart is useful for:

• Measuring the supply and demand forces and the liquidity of the market
• Confirming the validity and strength of the price movements and the trading signals
• Spotting volume patterns, such as volume spikes, volume divergence, and volume breakout

However, a volume chart is limited by:

• Not showing the volatility and momentum of the market
• Not being available or accurate for some markets or instruments, such as forex or cryptocurrencies
• Not being easy to analyze and interpret for beginners

Tick Charts

A tick chart is a type of non-time-based trading chart that shows the price data for every transaction or tick of the market. It is constructed by using a line, a bar, or a candlestick for each tick to show the price level and the direction of the market. The number of ticks per chart can vary depending on the trader's preference and the market's activity. A tick chart shows the real-time and granular price movements and the trading activity of the market.

Pic. Tick chart

A tick chart is useful for:

• Capturing the intraday and short-term price movements and the trading signals of the market
• Adjusting the chart's frequency and speed according to the market's activity and volatility
• Spotting tick patterns, such as tick scalping, tick divergence, and tick breakout

However, a tick chart is limited by:

• Not showing the time and duration of the price movements and the trading activity
• Not showing the trading volume and volatility of the market
• Not being easy to compare and synchronize with other charts and indicators

Range Bar Charts

A range bar chart is a type of non-time-based trading chart that shows the price data for every fixed price range or movement of the market. It is constructed by using a bar or a candlestick for each price range to show the opening, high, low, and closing prices of the market. The size of the price range can vary depending on the trader's preference and the market's volatility. A range bar chart shows the pure and consistent price movements and the trading activity of the market.

Pic. Range Bar chart

A range bar chart is useful for:

• Eliminating the noise and the sideways movements of the market
• Highlighting the trends and the swings of the price movements and the trading activity
• Spotting range bar patterns, such as range bar reversal, range bar breakout, and range bar pullback

However, a range bar chart is limited by:

• Not showing the time and duration of the price movements and the trading activity
• Not showing the trading volume and volatility of the market
• Not being easy to calibrate and optimize for different markets and time frames

Point and Figure Charts

A point and figure chart is a type of non-time-based trading chart that shows the price data for every significant price movement or reversal of the market. It is constructed by using a series of X's and O's to show the rising and falling prices of the market. The size of the price movement or reversal can vary depending on the trader's preference and the market's volatility. A point and figure chart shows the clear and objective price movements and the trading activity of the market.

Pic. Point & Figure Chart

A point and figure chart is useful for:

• Filtering out the noise and the minor fluctuations of the market
• Emphasizing the major trends and the reversals of the price movements and the trading activity
• Spotting point and figure patterns, such as double top, double bottom, and triangle

However, a point and figure chart is limited by:

• Not showing the time and duration of the price movements and the trading activity
• Not showing the trading volume and volatility of the market
• Not being easy to understand and apply for beginners

Renko Charts

A renko chart is a type of non-time-based trading chart that shows the price data for every fixed price movement or brick of the market. It is constructed by using a series of bricks to show the rising and falling prices of the market. The size of the price movement or brick can vary depending on the trader's preference and the market's volatility. A renko chart shows the smooth and consistent price movements and the trading activity of the market.

Pic. Renko Chart

A renko chart is useful for:

• Eliminating the noise and the choppy movements of the market
• Identifying the trends and the breakouts of the price movements and the trading activity
• Spotting renko patterns, such as renko reversal, renko breakout
• Renko breakout, and renko pullback

However, a renko chart is limited by:

• Not showing the time and duration of the price movements and the trading activity
• Not showing the trading volume and volatility of the market
• Not being easy to customize and fine-tune for different markets and time frames

Kagi Charts

A kagi chart is a type of non-time-based trading chart that shows the price data for every significant price movement or reversal of the market. It is constructed by using a series of vertical and horizontal lines to show the rising and falling prices of the market. The direction and length of the lines depend on the price movement and reversal threshold, which can vary depending on the trader's preference and the market's volatility. A kagi chart shows the dominant and decisive price movements and the trading activity of the market.

Pic. Kagi Chart

A kagi chart is useful for:

• Filtering out the noise and the minor fluctuations of the market
• Determining the supply and demand zones and the support and resistance levels of the market
• Spotting kagi patterns, such as kagi reversal, kagi breakout, and kagi pullback

However, a kagi chart is limited by:

• Not showing the time and duration of the price movements and the trading activity
• Not showing the trading volume and volatility of the market
• Not being easy to understand and apply for beginners

How to Choose the Best Type of Trading Chart for Your Trading Style

As you can see, there are many types of trading charts that you can use for trading, and each one has its own strengths and weaknesses. Therefore, there is no one-size-fits-all type of trading chart that works for everyone. You need to choose the best type of trading chart for your trading style, based on your goals, preferences, and risk tolerance.

Here are some factors that you can consider when choosing the best type of trading chart for your trading style:

• Your trading time frame. You need to choose a type of trading chart that matches your trading time frame, whether you are a long-term, medium-term, or short-term trader. For example, if you are a long-term trader, you may want to use a line chart or a bar chart, as they can show you the long-term trends and patterns of the market. If you are a short-term trader, you may want to use a tick chart or a range bar chart, as they can show you the intraday and short-term price movements and signals of the market.

• Your trading strategy. You need to choose a type of trading chart that suits your trading strategy, whether you are a trend follower, a swing trader, a scalper, or a breakout trader. For example, if you are a trend follower, you may want to use a candlestick chart or a renko chart, as they can show you the trends and the breakouts of the market. If you are a scalper, you may want to use a tick chart or a kagi chart, as they can show you the real-time and granular price movements and signals of the market.

• Your trading personality. You need to choose a type of trading chart that fits your trading personality, whether you are a visual, analytical, or intuitive trader. For example, if you are a visual trader, you may want to use a candlestick chart or a point and figure chart, as they can show you the price action and the market sentiment of the market in a more vivid and intuitive way. If you are an analytical trader, you may want to use a bar chart or a volume chart, as they can show you the price data and the market activity of the market in a more detailed and informative way.

By considering these factors, you can choose the best type of trading chart for your trading style, and improve your trading performance and results.

Key Takeaways

Trading charts are graphical representations of price movements and other market data over time. They are essential tools for traders and investors who want to analyze the market trends, patterns, and signals, and make informed trading decisions.

There are different types of trading charts that vary in their design, construction, and information. Each type of trading chart has its own advantages and disadvantages, and suits different trading styles, strategies, and objectives.

In this article, we have explained the main types of trading charts, how they are built, and how they can be used for trading. We have also helped you choose the best type of trading chart for your trading style, based on your goals, preferences, and risk tolerance.

We hope this article has helped you understand the types of trading charts and how to choose the best one for your trading style.