Nifty Trading academy Lesson : 1

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LESSON 1 VARIOUS CHART ANALYSIS AND THEIR
IMPORTANCE
By Nifty Trading Academy
NEED FOR CHART ANALYSIS Based on the past
statistics, forecast of future price movements
can be easily done. This kind of study is known
as technical analysis. As per the general
assumption, price patterns repeat like the
repeating history and the results of the study
can be shown in the form of charts for easy
understanding. With this method, people can
easily analyze prevailing market statistics and
thereby evaluate the existing stocks. Mass
psychology supports only this kind of
output. This technical analysis does not end in
complete predictions regarding the price
movements in future. However, it guides the
investors to expect what is going to happen to
the prices. It is not concerned with the
intrinsic value of the stocks and hence it will
not indicate the cost of a stock. What it can
reveal is whether the investments can turn into
gain or loss by solving the problem of timing.For
this analysis, different types of charts are
used showing the price over time. Investors must
keep in mind that this technical analysis is not
a science. It is an art with subjective approach
and so is open for interpretation. It is largely
flexible that it can suit to the style of the
individual, who trades or invests seriously.
Such a style development for any trader or
investor will take time along with their
untiring perseverance and constant effort.In
addition, streamlined courses from us will take
you to the next level of expertise. DIFFERENT
TYPES OF CHARTS EMPLOYED IN TECHNICAL
ANALYSIS Technical analysis is made easy with
the help of these charts because they represent
the price movements in the visual format.
Following are different types of charts that are
used by the traders and investors to study the
price fluctuations of stocks. LINE CHART This
chart represents the closing price. Whenthe
trader or investor takes a series of closing
prices, they will be visible as dots linked by a
line in the chart. By going through this line,
one can easily know the present behavior of that
particular stock. Closing prices is considered as
the most powerful and important
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information that reveals the end of the game and
informs about the winner. This chart is the
simplest one with powerful information. Display
1 Line Chart of NIFTY,got by joining the blue
dots which are closing prices.
BAR CHART
This is the popular chart among traders and
investors due to its large amount of information
it reveals. This chart displays four types of
information to the user. It provides details on
Open, High, Low and Close prices. People focus
more on the Low and High prices of bar chart than
the other details. The price movements within a
given period can be studied clearly using this
chart. Display 2 Bar Chart Example low, high,
open and close prices shown by one bar
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Display 3 Bar Chart example low, high, open and
close prices shown by multiple bars
CANDLESTICK CHART
Japan, 150 years ago, introduced Candlestick
Chart which points out the Open, Close, High and
Low price movements like the bar chart. It will
display a white body candle if the closing price
is more than the opening price and a black body
candle if the closing is lower than the opening
price. White candle stick is considered as
Bullish whereas the black candle stick is Bearish
and the distance between the Open and Close
position is called Real Body. Again, the
distance between Real Body and High is considered
as
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Upper Shadow whereas Real Body and Low is
Lower Shadow. This chart clearly shows the
market direction. Display 4Displaying bullish
and bearish candles with lower and upper shadows.
Display 5 Another example of candlestick chart.
RENKO CHART
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Renko, derived from the Japanese word renga,
means brick. Bullish white bricks and Bearish
black bricks are used in this chart also. The
brick sizes are already determined. When the
prices move more than the last brick size, then
a new brick is added. This chart is not related
with time and is very useful to know the current
trend by providing clear indication.Further, it
also eliminates the noise factor created by the
price movements. The brick positions will remain
same without any change if the price movements
are not up to the expected level. Display 6
Sample display of Renko Chart
Display 7 NIFTY position with brick size 50
through Renko Chart
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Display 8 Another Renko Chart of NIFTY with
brick size 25 making the trend easily identified
POINT FIGURE CHART
This is completely different from the above
mentioned bar or candlestick chart types. It does
not bother about either volume or time. It has
two columns as X and O when the price movement
is upwards, X column rises and when the price
movement is downwards then O column rises. Hence,
X is bullish and O is bearish. Each column
will have either X or O but not both. The box
size must be multiplied by reversal amount so
that columns can be changed. For example, if the
reversal amount is 3 and the box
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• size is 10, the price will move 30 points 10 x
  3 in order to change the column. Change in the
  current trend is indicatedby the change in the
  columns.
• BENEFITS OF POINT AND FIGURE CHART ARE
• Indicates only the price movements
• No inclusion of time factor providing the
  audience simple and straight forward information.
• Hence, they can easily find out the supporting or
  the resisting levels.
• Display 9 Point Figure Chart displaying NIFTY
  with box size 50 and reversal amount 3. X
  indicates upward movement of prices O
  indicates downward movement of prices.

THREE LINE BREAK CHART
Introduced in Japan, Steve Nison popularized this
in western countries.It is named thus due to the
number line blocks represented. Rising and
falling prices are represented by white and black
lines respectively. When the closing price is
higher or lower than the two lines already there,
a reversal procedure takes place by introducing a
new white or black block. According to Meta stock
Help, To draw line break blocks, todays close
is compared to the high and low of the previous
block. A block is drawn only when todays close
exceeds the high or low of the previous block. If
todays close is higher than the top of the
previous block, a new white block is drawn in the
next column from the prior high to the new high
price. If todays close is lower than the bottom
of the previous block, a new black block is drawn
in the next column from the prior low to the new
low price. If the close fails to move outside the
range of the previous blocks high or low, then
nothing is drawn.
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Display 10 Price movement through Three Line
Break Chart
Display 11 Identification of Supports/resistances
for TATAMOTORS through Three Line break Chart
KAGI CHART
This chart system also is introduced in Japan and
is popularized in Western countries by Nison.
Kagi in Japan means woodblock printing art. The
lines in this chart indicate the price movements
by its thickness.
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This chart does not include time aspect. The
lines extend if the closing price continues inthe
same direction and in case the price movement is
reversed the new lineis drawn in opposite
direction. Moreover, the moment the closing
price penetrates the last column, the line
thickness changes. Thisis very useful for the
trader who wants to know about the major price
swings. Display 12 Position of TATAMOTORS
through Kagi Chart. Calculation Method
Percent Reversal Amount 3 Note it becomes
easy to find out tops and bottoms.
Display 13 Same Kagi Chart with different
calculation method Calculation Method Point
Reversal Amount 3
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One of the most popular methods of using this
Kagi Chart is to wait for a thin line and go
along the thick line which is very recent. It
represents the latest high swing. Display 14
Sample of Kagi Chart of TATA STEEL
Thanks For Read This Article. Also Read Lesson
2 Know the Terms Trend line, Volume, Supports
Resistances
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