SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT (MCOM S3) - LECTURE 17: PRICE CHARTS (MODULE 2)

This session deals with the meaning and 2 types of price charts used in technical analysis.
The price chart is the basic tool used by the technical analyst to study the share price movement. Charting represents a key activity in technical analysis, because graphical representation is the very basis of technical analysis. It is the security prices that are charted. The prices are plotted on XY graph where the X axis represents the trading days and Y axis denotes the prices
A share may be traded in the market at different prices on the same day. Of these different prices prevailing in the market on each trade day four prices are important. Opening Price, Closing Price, Highest Price, Lowest Price.
Again of the four, closing price is by far the most important price of the day because it is the closing price that is used in most analysis of share prices.
Three types of charts are currently used by technical analysts. These are:-
1. Line Chart or Price closing Chart.
2. The Bar chart.
3. The Japanese candlestick Chart.
LINE CHART
It is the simplest price chart.
In this the closing price of a share are plotted on the XY graph on a day to day basis.
The closing price of the day would be represented by a point on the XY graph.
All these points would be connected by a straight line which would indicate the trend of the market.
BAR CHART
In this chart the highest price, the lowest price and the closing price of each day are plotted on a day to day basis.
A bar is formed by joining the highest price and the lowest price of a particular day by a vertical line .
The top of the bar represents the highest price of the day , bottom represents the lowest price of the day and a small horizontal hash on the right side of the bar is used to represent the closing price of the day.