Types of Charts
Trading charts are one of the most important tools you can use when you invest. But it can be difficult to tell Renko charts apart from Heikin Ashi ones and assess the best intervals - from intraday scalping to 5-minute and 1-hour timeframes.
This guide features the best trading charts, including bar, candlestick and line versions. We also explain how to set up and interpret yours. Lastly, we share tips on where to find the best free and paid chart software.
Real-time charts
The best charts for Day Trading
There are many different types of line charts, from Heiken Ashi to Magi and Tick charts. You need to find the one that best suits your trading style.
It's important to note that each chart has its pros and cons and there are many variations. Candlestick charts are particularly popular because they provide more information than a basic line chart.
Line charts
Line charts are very popular intraday trading charts. They give you the closing price. You still choose a time frame, but the chart will only show the closing price for that time frame, for example 1 hour. Each closing price will be connected to the next closing price by a solid line.
A line chart helps eliminate noise and provides a brief overview of price action. They are particularly useful for drawing trend lines, as they mask all trading noise. However, you wouldn't want to base your investment decisions solely on this data because key information will be missing.
Bar charts and candlestick charts
Most of the trading charts you see online are bar charts and candlestick charts. They give you the most info in an easy to interpret format. In other words, they show the evolution of prices during a given period.
The size of the bar or candlestick depends on the chosen time frame. Let's say the price bar or candle is generated every 4 hours. The bar charts and candlestick charts display the price at the start of those 4 hours, as well as the highest and lowest prices during that time. Additionally, you also see the final (closing) price of the time frame you are trading with.
Bar charts
Bar charts consist of vertical lines representing the price range over a given period. The horizontal lines indicate the opening and closing prices. If the open price is lower than the close price, the line will usually be black and red. If the open price is higher than the close price, the line is green.
Bar charts effectively extend line charts, adding the open, high, low and close. They remain relatively easy to read while still giving you crucial information that basic line charts don't provide.
Ticks
Day trading with tick charts isn't common, but some swear by it. The bars on a tick chart created according to a set number of trades. So a 220 tick chart creates a new bar every 220 trades, for example.
They allow you to program your entries with ease, which is why many claim that tick charts are the best for day trading. They are not affected by time. So, during heavy trading activity, a bar may form every minute, but it may take several hours if trading is slow. This means that in times of high volume, a tick chart will show you more crucial information than many other variations.
Candlestick charts
Heikin-Ashi
If you day trade, an article on Heiken-Ashi charts will probably eventually fall under your radar. This form of candlestick chart originated in Japan in the 1700s.
So why do traders use them? Because they filter out a lot of unnecessary information and you get a very clear view of a trend. They are therefore ideal for beginners. But they are also very useful for experienced traders. The Heiken-Ashi chart will help you stay in trends and allow you to easily spot trend reversals.
Renko
Consider a Renko chart if you're looking to get started with day trading using charts. The term "Renko" comes from the Japanese word "renga", which means "bricks". This type of chart only shows price movement. You won't get any indications in terms of time or volume.
When the price exceeds the high or low of the previous brick, a new brick is placed in the next column. You will see white/green bricks when the trend is up and black/red bricks when the trend is down. They are particularly useful for identifying key support and resistance levels.
Kagi
A Kagi chart needs the reversal amount that you specify as a percentage or price change. Then the chart changes direction once the price turns in the opposite direction of the predetermined reversal amount.
You'll see different line widths in a Kagi chart. The line thickens if the market is higher than on a previous swing. Likewise, the line gets thinner when the market crosses below a previous swing.
These charts are suitable for day trading, as they emphasize breaking swing highs and lows. They're also useful for finding support and resistance levels, allowing you to follow the market trend.
Line break charts
The line break chart is similar to Renko and Kagi charts. It shows price movements and omits time intervals. The breakout line uses descending bars and ascending bars to illustrate rising and falling prices.
A line break chart compares the closing number of the previous line with the most recent line. When the price goes up, the next line is higher, but if the price goes down, the next line goes below the previous line. If the price doesn't budge after a given amount of time, no line is drawn.
How to use trading charts
You already know that charts show real-time prices and price history. But taking note of recurring patterns and their results will help you solidify your strategy.
Technical analysis is the most common reason why traders use charts. The basics of technical analysis are to identify support and resistance lines, trends and trend reversals. Certain indicators can help with this, such as moving averages, pivots, and the MACD.
For traders who are just getting started, backtesting is a great way to use charts and indicators. When you want to test an idea for a strategy, you can backtest the strategy on a demo account to find out its success rate and how it generally performs.
Traders can also use charts in many other ways. You can monitor the market and see how the price reacts to different price areas or even view the impact of historical events on price. It all depends on what you want to do at a particular moment.
Software
You can find a whole range of chart software, from apps to web platforms. The best chart software will allow you to easily create visually appealing graphics. You should also have access to all technical tools and analyses with just a few clicks.
Most brokers offer charting software, but some traders opt for additional, specialised software. If you are new to day trading using charts, the standard software provided by your broker should meet your needs.
All of the popular chart software below offers line charts, bar charts and candlestick charts. They also offer many customisation features:
A final word on charts
This article has explained the nuts and bolts of trading charts. Used correctly, charts can help you navigate through past price data to help you better predict future changes. There's lots of chart software out there, including several free options. Look for charts with many customisation features and a range of technical tools that can help you identify sure-fire patterns.
FAQ
Is it easy to day trade using charts?
If you're willing to put in the effort, day trading using charts will help you gain an edge. Becoming a pro will require a lot of discipline, a good strategy, risk management and consistency.
How can I start to trade with real-time charts?
The best way to start trading with live charts is to experiment with a free demo account. This way, you won't lose real money while you learn and refine your approach and your preferred chart setups.
Is there free chart software I can use for trading?
Your broker should offer a trading platform with access to free charts and indicators. If not, check out websites like TradingView, which feature a variety of charts, indicators, and trading tools.
What is the best chart for day trading?
There's no universal "best chart", but choose one that gives you all of the market info you need, is easy to follow and matches your trading style. You can also keep in mind the time frame you want to use, as some charts work better in specific time frames.
Which trading charts are the easiest to learn?
The most popular charts are candlestick charts. They are beginner-friendly and easy to use. Use our guide above, which includes examples, to get started day trading with charts.