As technical analysis becomes an increasingly popular tool for trading the markets, the features of charting packages have never been more important. So why do you need to use trading charts?
A chart provides a simple way to visualise and analyse historical prices for a particular market, and the way those prices have changed over time. Whatever trading strategy you use, you need to understand price behaviour in your chosen market before you start to trade. A price chart helps you do that.
Modern charting packages allow traders to visualise price activity in different forms. Three of the most common types are bar charts, candlestick charts, and line charts. These chart types are based on the same price activity, but different aspects of the trading data are emphasised in each case.
In a bar chart, the open, close, high and low prices of a given time period are displayed: each bar extends from the low to the high for the interval with a left-side spur showing the open and a right-side spur showing the close (last price during this interval). This allows traders quickly to identify whether prices rose or fell over the interval.
Candlestick charts are similar but with one key difference: the space between the open and close is filled and coloured to show whether the interval had a positive or negative close. A wick extends at the top and bottom to the high and low for the interval. Candlestick charts allow different types of price pattern to be identified and are commonly used by traders with shorter-term strategies.
Line charts (or tick charts) remove the open, high and low price data and only show the last price traded during the interval. Prices appear as a simple line graph. This type of chart is often used by news traders on intraday timeframes where in-depth technical analysis is not utilised.
All chart types are alike in one respect: they show price over time. So to gain a different perspective on price activity all you need to do is select a different timeframe. Shorter-term traders can view prices at five-minute intervals, say, while traders taking longer-term positions might choose to view prices at weekly intervals. The most commonly referenced timeframes are the hourly and daily charts but many charting platforms allow you to customise this data to fit your individual trading style.
Technical analysis is the attempt to predict future market prices by studying past prices, based on a number of theories concerning the recurrence of particular patterns in market activity.
Technical analysts will seek to identify well-known patterns in the price chart, to establish the support and resistance levels for price trends, and to gauge the likely continuance of established trends using a range of technical indicators.
Some traders will combine technical analysis with a study of fundamentals or breaking news, while others will focus solely on the study of prices. Either way, you will need flexible charting software to conduct your price analysis.
InterTrader provides free charting software suitable for both new and experienced traders, fully integrated with the trading platform. Traders can access integrated charts or IT-Finance advanced charts direct from the web-based platform, or view charts on the move via our apps for iPhone®/iPad® or Android devices.
Our charting software gives you bar, candlestick or line charts, with a wide range of timeframes, a full set of technical indicators, and the ability to test trading strategies against real price data.
You can also set email and instant message alerts to be sent when certain market conditions or trend changes occur on your chart. In this way an interactive chart can help a trader monitor a market without being physically in front of the trading station.
As you grow more comfortable using charts you’ll develop your favourite chart set-ups: with your preferred timeframe, indicators and overlays. Our charting software lets you save your most useful set-ups to apply to future charts at the click of a button.