Different Stock Charts – Pros and Cons
Like everything else in life, stock charts come with their advantages and disadvantages. Line charts, bar charts, and candlestick charts certainly are not perfect, and each type of chart has its pros and cons.
Below, we will go through each chart type together and explore their weaknesses and limitations to help you choose a stock chart type that best suits your trading style and needs. Let’s get to it!
Best Stock Charts – Pros and Cons
In the following sections, you can check the advantages and disadvantages of line, bar, and candlestick charts.
Line Chart – Pros and Cons
Advantages of Line Charts
- Most basic, simple, and clean chart type used amongst stock traders
- Easy to understand and interpret, even for newbie traders
- The quickest way of identifying the trend
- Eliminates the entire market noise
- Useful for quick updates on developments when on the go
- Interactive and customizable type of chart
Disadvantages of Line Charts
- Doesn’t provide sufficient information compared to other chart types
- Not appropriate for depth look study of a stock
- Filters out lots of information
- Difficult to spot a change in direction and buy or sell signals
- Only uses the closing stock price information
- Does not show opening stock prices
Bar Charts – Pros and Cons
Advantages of Bar Charts
- Provides more information about a stock compared to line charts
- Offers a wider range of information and economic data
- Provides information on the open, close, high, and low price for a specified period
- Easy to use and spot patterns
- Works with most technical indicators, including moving averages
- Interactive single chart type
- Visually rich and precise, which allows investors to analyze the market and trends with ease
Disadvantages of Bar Charts
- Not as simple to read as candlestick charts
- Visually more difficult to determine whether a stock has grown or fallen in value over a specified period
- Not easy for newbie traders to understand which bar is rising and which is falling
Candlestick Charts – Pros and Cons
Advantages of Candlestick Charts
- Most popular chart type among day traders
- Most informative chart type
- Provides information on the open, close, high, and low price for a specified period
- Easy to read and interpret
- Represents the most fundamental data needed to make decisions
- Provides full information for every time frame
- Works with most technical indicators
- Offers a deeper insight into stock action
- Designed to be used in combination with other technical analysis tools
- Interactive and customizable type of chart
Disadvantages of Candlestick Charts
- Does not show the exact stock movements
- Fewer candlesticks on the screen in comparison with bar charts, meaning that it offers less information for an analysis
- Market gaps are common
- Does not tell you whether the high or the low came first
- Appears different in every time frame
Summary
To summarize, each type of stock trading chart has pros and cons. But remember, eventually, you will have to know how to use each chart type. For example, you may use candlestick charts in your trading strategy, but you must know how to read and interpret a line or a bar chart.
And if you would like to explore further how these charts work and search for some patterns yourself, you can download the MT4 (MetaTrader4) and practice on one of the best trading platforms available in the market.
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