Share trading is a very dynamic activity. Presently, online share trading activity happens through the Demat account. Intraday trading charts depict the inherent trends in the share price movements graphically to make appropriate buying and selling decisions. These intraday trading charts also serve as crucial reference points.
This article describes the features and usage of various intraday trading charts commonly used by stock market enthusiasts.
Applications of Common Intraday Trading Charts
Line charts are commonly used in intraday trading activity and present only the stock’s closing price. Thus, this chart is used to compare a stock’s closing price over several days. However, it has limited application in the decision-making process since it does not provide stock market trends.
The Tick-Trade chart is a line chart that presents every trade completed in the stock market. A flat line depicts a lack of trades (as in illiquid markets). A constant increase or decrease in share prices (a characteristic of highly liquid markets) results in the movements in the charts. Thus, the traders track the movement in the chart to identify “out of money” trades and buy certain shares.
Bar charts are a higher version of line charts. The vertical lines of this chart depict the price range (such as open, low and high prices) in a given period. The advantage is that these charts help graphically gain awareness about stock prices.
This particular type of bar chart provides the best reference regarding intraday trading. It is a dynamic chart wherein a bar forms every minute when the volume of trading activity is at its peak. Thus, this one provides a vibrant trading picture compared to other charts.
These charts depict the opening and closing prices and the high and low prices attained by the stocks. Therefore, these charts help perform trend analysis in the short term. An example of this type of intraday trading chart is the Renko chart. It helps indicate the price movements and the price resistance.
As the name suggests, this intraday trading chart helps depict the hourly price movement of a given stock. Thus, one can get explicit price information on a specific day. Like candlestick charts, these charts also provide the opening, closing, and low and high stock prices for a given time period. Thus, they can be used for short-term analysis.
15 Minute, 5-Minute and 2-Minute Charts
Like hourly charts, analysts construct 15-Minute, 5-Minute and 2-Minute charts. These charts depict the stock’s opening, closing, and high and low prices at the intervals mentioned above, respectively. Traders who intend to go for short-term trading activities ranging from an hour to a few minutes use these charts. Traders with a long-term perspective use these charts to determine the most favorable entry and exit points.
Presently, share trading is carried out in an online virtual environment (aided by information and communication technologies). It is a highly dynamic process where shares can be grabbed or discarded within minutes. This requires quick and accurate decision making using graphical representation through intraday trading charts rather than through data presented in a tabular form. Such decisions are unambiguous with regard to stock price movements. Moreover, trade data from charts are helpful to analyse the share market’s short-term, medium-term, and long-term aspects.