## Basic Charts

Technical Analysis is the study of price and trend changes in Commodities, Stocks, Futures and various other market instruments. The price changes are primarily evaluated by various indicators, oscillators or trading systems to give a trader an edge in trading. Technical analysis is not a perfect science by any means, but it does have certain characteristics, patterns or indications which may be repetitive or may be intuitive and tend to possess Zen-like predictability power. Technicians plot these prices and price changes on a chart and apply various indicators and studies to figure out potential supply and demand areas, trade setups, targets and stops to win.

Technicians have developed various methods of representing market data on charts. The most extensively used charts are bar charts, line charts, candlestick charts and point & figure charts. There are many other variations like Kagi, Renko and Range bar charts. In this section, I will attempt to address the basic charts and their usage.

The most basic charts in technical analysis follow simple Cartesian structure (X&Y axes) to draw in 2-Dimensional space. On the X-axis (Horizontal), the time is plotted and on the Y-axis (vertical) the corresponding price is plotted. Any indicators derived from the time and price values, are either overlaid on the chart itself or plotted in secondary-graphs below and above the main price/time chart. Some traders plot volume on the X-axis as a representation of market activity.

Charts are plotted using various scales such as arithmetic or log /semi log charts. Arithmetic charts have the same distance between the prices where as log or semi log charts have a variable distance to represent the proportionate price movements.

There are many facets in technical or chart analysis to understand and master. Price, Volume, and Time are the three most basic components of the market. Many successful traders only study price action to make money. Many other traders use complex mathematical theories and faster computer technologies to analyze and participate in the market action. Nevertheless, regardless of any trading theory or complex mathematical algorithm, the success in the markets lies with individual who can clearly understand the price-action and make the decisions to pull the trigger at the right time with excellent discipline. These individuals possess a higher understanding of market theories, market psychology and dynamics and money management methods and have mastered their execution skills.

Charts, patterns, indicators and software are only basic market tools. Successful traders view them just as tools and understand the usage. They build a theory and trade with a solid money management plan.

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