Different Stock Charts – Pros and Cons
As everything else in life, stock charts come with their advantages as well as their disadvantages.
Yup, that’s right.
Line charts, bar charts and candlestick charts certainly are no Ed Sheeran song. They surely ain’t perfect.
Below, we will go through each chart type together and explore their weaknesses and limitations to help you chose a stock chart type that suits your trading style and needs best.
Let’s get to it!
Best Stock Charts
In the following sections you can check the advantages and disadvantages of line and bar charts.
The Advantages and Disadvantages of Line Charts
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 customisable 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 and overlook too much 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
The Advantages and Disadvantages of Bar Charts
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 time 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 analyse 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
The Advantages and Disadvantages of Candlestick Charts
Advantages of Candlestick Charts
✅ Most popular chart type among day traders
✅ Most informative chart type
✅ Easy to read and interpret
✅ Represents 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 customisable 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 on every time frame
❌ Laggs an indicator
And that’s all the main options!
Now that we got the comparison chart out the way, which chart type do you think you will be using when trading stocks?
Remember to consider your trading style, your experience, how much you are willing to risk, and how much time you are willing to put into this.
It’s all about taking small, easy steps.
Making the right decision for yourself may contribute majorly in determining your success as a stock trader.
No pressure.
We are here to guide you every step of the way!
And if you would like to further explore how these charts work and search for some patterns yourself, why not download the MT4 (MetaTrader4) and practice on one of the best technical analysis platforms out there?
It is completely free and you will get access to all additional features that we have not yet explored.
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You in? Get the practice in!