Chart Analysis
Chart analysis, often referred to as technical analysis, is a fundamental tool employed by investors to analyze and interpret historical price movements of financial assets such as stocks, bonds, commodities, and currencies. This method relies on the study of charts and graphical representations of price data over time to identify patterns, trends, and potential future price movements. Investors use chart analysis as a crucial component of their decision-making process, seeking insights into market behavior and making informed predictions about future price movements.
The primary goal of chart analysis is to understand the psychology of market participants and the forces that drive price changes. By examining historical price charts, investors can identify recurring patterns, such as head and shoulders, triangles, and trendlines, which provide valuable insights into potential future price trends. Additionally, technical analysts use various indicators and oscillators, such as moving averages, relative strength index (RSI), and stochastic oscillators, to quantify and measure market momentum, strength, and overbought or oversold conditions.
One of the key principles behind chart analysis is the belief that historical price movements tend to repeat themselves. Technical analysts argue that price patterns and trends reflect the collective actions and emotions of market participants, and by understanding these patterns, investors can gain a competitive edge in anticipating future market directions. This approach is particularly popular among short-term traders and swing traders who aim to capitalize on short-term price fluctuations.
Chart analysis is not without its criticisms, as some investors argue that it relies too heavily on historical data and fails to consider fundamental factors that may impact a security’s value. Nevertheless, many investors find value in incorporating technical analysis into their overall investment strategies, viewing it as a complementary tool alongside fundamental analysis. Ultimately, the utilization of chart analysis allows investors to make more informed decisions by adding a quantitative and visual dimension to their analysis of financial markets.
This section describes the various kinds of financial charts that investors use on a regular basis. The articles below describe how the charts are constructed and how they can be used to make better investing decisions.
The Fundamentals
What Are Charts?
We discuss what charts are, how to pick timeframes, how charts are formed and the different types of price scaling.
Support and Resistance
We explain what support and resistance are, where they are established and the methods used to establish them.
Trend Lines
What are trend lines? We examine this question along with scale settings, validation, angles and more.
Gaps and Gap Analysis
We examine the concept of gaps (areas on price charts in which no trades occur) and what they imply regarding the fundamentals or mass psychology surrounding a stock.
Introduction to Chart Patterns
We give a brief review of what chart patterns are and how you can recognize them.
Chart Patterns
We present a collection of common chart patterns.
Chart Types
Arms CandleVolume
A price chart that merges traditional candlesticks with EquiVolume boxes.
CandleVolume
A price chart that merges traditional candlesticks with volume.
Elder Impulse System
A charting system developed by Alexander Elder that colors price bars based on simple technical signals.
EquiVolume
Price boxes that are sized based on their trading volume.
Heikin-Ashi
A candlestick method that uses price data from two periods instead of one.
Kagi Charts
A Japanese charting method based on volatility and reversal amounts.
Renko Charts
A Japanese charting method where boxes rise and fall in 45-degree patterns.
Three Line Break Charts
A Japanese charting method that ignores time and only represents change in terms of price movements.
MarketCarpets
A charting tool used to visually scan large groups of securities.
Relative Rotation Graphs (RRG Charts)
A visualization tool for relative strength and momentum analysis.
Seasonality Charts
A unique tool for identifying monthly seasonal patterns.
Yield Curve
A visualization tool using bond yields to analyze market conditions and the economic cycle.
Candlestick Charts
Introduction to Candlesticks
We present an overview of candlesticks, including history, formation and key patterns.
Candlesticks and Traditional Chart Analysis
We discuss how to use candlesticks with moving averages, volume and chart patterns.
Candlesticks and Support
We examine how candlestick chart patterns can mark support levels.
Candlesticks and Resistance
We examine how candlestick chart patterns can mark resistance levels.
Candlestick Bullish Reversal Patterns
We describe common bullish reversal candlestick patterns in detail.
Candlestick Bearish Reversal Patterns
We describe common bearish reversal candlestick patterns in detail.
Candlestick Pattern Dictionary
We present a comprehensive list of common candlestick patterns.
Bull Flag
Point & Figure Charts
Point and Figure Charts
We discuss how to use and interpret Point and Figure Charts.
Chart Annotations Tools
Cycles
We present the steps to finding cycles and using the Cycle Lines Tool.
Fibonacci Retracements
We define Fibonacci retracements and show how to use them to identify reversal zones.
Fibonacci Arcs
We show how Fibonacci Arcs can be used to find reversals.
Fibonacci Fans
We explain what Fibonacci Fans are and how they can be used.
Fibonacci Time Zones
We describe what Fibonacci Time Zones are and how they can be used.
Quadrant Lines
We define Quadrant Lines and show how they can be used to find future support and resistance zones.
Raff Regression Channel
We examine this channel tool based on two equidistant trend lines on either side of a linear regression.
Speed Resistance Lines
We present how these retracement-based trend lines are used on charts.