Stock charts, what to use.

With all the different ways to view stock charts it can be a little confusing. The first step is figuring out whether to use a line chart, bar chart, or candlestick chart.

Let us compare them. Candlesticks and Bar charts give more information than the simple line chart. They tell you the opening and closing price along with the high and low of each individual day.

Even though they both give off the same information I personally prefer the candlestick because it is much easier to read. If you get use to the bar charts they are probably just as easy to use. But for new traders the candlestick charts make life simpler.

The line chart is much different than the other two. It only plots the closing price of each day and then just connects the dots, like a basic graph. This type of chart, weeds out all of the noise that you get from candlesticks and bar charts.

Line charts make it easier to identify support and resistance and chart patterns. Because of this they make it easier to make quick decisions on whether the stock is bullish or bearish.

But for all of these advantages line charts make it harder to determine where to set stops. For instance you find a stock that has just hit support and is bouncing up. It looks like a good buy.

Looking at your line chart you buy it and place a stop 1% below support. However with a candlestick chart you are able to see the highs and lows of each day. You can determine how wide the daily trading range is.

Maybe the stock is extremely volatile during the day. In this case you may want to set your stop 2 or 3% below support so your stop does not get kicked out of a trade early. The daily trading ranges can be important to determine where your stops should go. That is something very important that the line chart does not provide.

In the end it is up to each individual trader to determine how to set their stock charts.