Use of a line graph for market analysis
(Introduction to line chart) A line chart is like a graph that people use to study the market. It's really helpful for predicting what might happen in the future. With a line chart, you can see patterns and figure out the best times to buy or sell. Other types of charts don't work as well for this. It's easier to spot patterns like Head and shoulders, Double/Triple bottom, Flag and Pennant with a line chart than with Japanese candlesticks.
The lines on a line chart show the most accurate levels of support and resistance. But, the line itself can't tell you exactly what prices will be in the future. Most traders like to use bars or Japanese candles when they use indicators to help them make decisions.
Example of the line chart application for market analysis
Check out this picture! It shows a cool pattern called Head and Shoulders. You can see it by looking at the line chart. It's easy to spot because it follows certain rules, like breaking the line at the neck and then testing it again from the bottom to the top.
Pros and cons of the line chart
Pros:
Simplicity.
So, check it out, there's this thing called a line chart. It's like a fancy curve that shows the price of something. But here's the cool part, it's not tricky or confusing at all! Even if you're just starting out, you can totally get it. No traps or pitfalls to worry about here, my friend. It's all smooth sailing!
Applicable with the graphic method of analysis.
This cool way of showing a price helps traders to draw lines that show where the price might go up or down, and figure out cool shapes that happen in the price.
Cons:
Does not show gaps.
So, like, a line chart is a way to show how prices change over time. But, here's the thing, it doesn't really show any gaps in prices. You know, like when the price jumps from Friday to Monday? Yeah, the line chart just connects those two prices with a line. It's pretty simple, right?
Does not give full information.
This chart is not as informative as the other charts. Let me explain why. When you look at the daily timeframe, you can see the prices for different time intervals in the past. However, what you won't find out is what actually happened during each day.