Chapter - 3
Introduction to Charts
Part I
CMT LEVEL - I

What is Charts?
• Charts are simply graphical representations of a
series of prices over time.
•Charts are the most fundamental tool for
technical analysts

What is Charts?
PRICE
Y- AXIS
TIME (AXIS)

Chart Scale
• The common denominator is that price is
typically on the Y-axis and time is usually on the
X-axis.
• Time scale, Price scale, and Price point properties
are used in the creation of the chart.

TIME SCALE
• The most frequently used time scales are
intraday, daily, weekly, monthly, quarterly, and
yearly.
•Shorter timeframes are commonly used by day
traders or investors looking for greater

TIME SCALE
Time Scale Significance (Trade Validity)
Intraday Charts Trade Validity for Whole Day
Daily (EOD) Charts Trade Validity for Week to Month
Weekly Charts Trade Validity for Month To Quarter
Monthly Charts Trade Validity For more than a Year
Year Chart Trade Validity for More than a Decade

Types of Price Charts
Line Chart Bar Chart
Candle
Stick Chart

Line Charts
•Represents only closing price at the End of day
•Do not provide information on trading range
•Can be drawn also on open , low , high , close
prices

Line Charts

Bar Charts
•Represents whole price range of the day (HLCO)
•Each Bar represent one day price action
•On left side tick shows open price and on the
right side shows close price

Bar Charts

Bar Charts

Candle Stick Charts
•Candlestick charts originated in Japan.
•This charting method was used as early as the
mid-1600s to trade rice futures in the Japanese
markets
•Thin line is called as shadow & Wider portion is
called as Real Body.
•Technical tools rely on the Colour and size of
individual candlesticks to signal trades

Candle Stick Charts

Candle Stick Charts

Candle Stick Charts
•Candlestick charts are used by traders to determine
possible price movement based on past patterns.
•Candlesticks are useful when trading as they show
four price points (open, close, high, and low)
throughout the period of time the trader specifies.
•Many algorithms are based on the same price
information shown in candlestick charts.
•Trading is often dictated by emotion, which can be
read in candlestick charts.

Benefits of Charts
• Charts provide a concise price history
• Charts provide the investor with a good sense of the market's volatility
• Charts can be a useful tool to the fundamental analyst
• Charts can serve as a timing tool,
• Charts reflect market behavior that is subject to certain repetitive patterns
• Charts can be used as a money management tool