{"id":938701,"date":"2023-11-10T13:32:21","date_gmt":"2023-11-10T11:32:21","guid":{"rendered":"https:\/\/www.etoro.com\/trading\/charting\/"},"modified":"2025-10-31T13:51:17","modified_gmt":"2025-10-31T11:51:17","slug":"charting","status":"publish","type":"page","link":"https:\/\/www.etoro.com\/en-us\/trading\/charting\/","title":{"rendered":"Using Charts in Technical Analysis"},"content":{"rendered":"\n

Price charts play a crucial role in trading and investing because studying historical price moves can provide clues as to where prices might head next. There are various types of price charts that can be used, including bar charts, candlesticks, and point and figure charts.<\/p>\n\n\n\n\n\n\n

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The current price of an asset<\/e-tip>, alongside its historical price history, can be considered the starting point of most trading strategies. Proponents of fundamental analysis<\/a> will consider an asset\u2019s current valuation<\/a> and then incorporate \u201creal world\u201d factors, while those interested in <\/strong>technical analysis<\/strong><\/a> strategies<\/strong> will typically give much more weight to \u201cprice action\u201d and often base trading decisions on charts alone.<\/p>\n\n\n\n

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Tip: <\/strong>The principles of chart analysis can be applied to any asset, from stocks<\/a> to forex and commodities to crypto<\/a>.<\/p>\n<\/div><\/div>\n\n\n\n

Why do people use charts in technical analysis?<\/h2>\n\n\n\n

Technical analysis charts allow you to analyze how a price has moved in the past<\/strong>, and from there, determine which direction it might move in the future.<\/mark><\/p>\n\n\n\n

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It is possible to identify trends<\/strong>, and moments when trends stop and reverse, and use technical indicators<\/a> to establish if a market might currently be overshooting either upwards or downwards.<\/p>\n\n\n\n

Charts can be set to different time frames<\/strong>, so it is possible to consider price moves that occur over minutes, hours, days, weeks or months. Charting can accommodate traders using short- and long-term strategies<\/a>, but to understand the overriding direction of the market, it is usually best to consider price charts that show a longer time frame.<\/p>\n\n\n\n

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Tip: <\/strong>\u201cCharting\u201d is a form of trading that bases trading decisions entirely on price action.<\/p>\n<\/div><\/div>\n\n\n\n

Types of technical analysis charts<\/h2>\n\n\n\n

All price charts plot an asset\u2019s price over time<\/strong>. The simplest representation of this is a line chart, but there are other factors and data points that can be incorporated into the visual display.<\/p>\n\n\n\n

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This is done to make the chart more informative<\/strong> and to allow traders to gain a better and instant understanding of market conditions. Below, you can see an example of an asset\u2019s price movement over time through a line chart.<\/p>\n\n\n\n

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Line chart \u2013 GBPUSD<\/a> (2020 \u2013 2023)<\/strong><\/td><\/tr><\/tbody><\/table><\/div><\/div><\/figure>\n\n\n\n
\"\"<\/a><\/figure>\n\n\n\n

Past performance is not an indication of future results<\/em><\/p>\n\n\n\n

Source: eToro<\/a><\/p>\n\n\n\n

Bar chart<\/h3>\n\n\n\n

The bar chart, as seen in the example below, introduces the terms \u201copening price\u201d, \u201cclosing price\u201d, \u201chigh price\u201d and \u201clow price\u201d. For any time interval, whether it is 10 seconds or one month, each bar will show each of those prices<\/strong> in graphic form.<\/p>\n\n\n\n

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Bar chart \u2013 Bitcoin<\/a> (2022 \u2013 2023)<\/strong><\/td><\/tr><\/tbody><\/table><\/div><\/div><\/figure>\n\n\n\n
\"\"<\/a><\/figure>\n\n\n\n

Past performance is not an indication of future results<\/em><\/p>\n\n\n\n

Source: eToro<\/a><\/p>\n\n\n\n

Candlestick<\/h3>\n\n\n\n

A candlestick chart<\/a> follows the same methodology as a bar chart, but the area between the opening and closing price is shown as the \u201cbody\u201d of the candle<\/strong>. In the example below, the bodies are color-coded according to whether the price moved up or down during the interval, which allows traders to get an immediate understanding of market mood<\/e-tip>.<\/p>\n\n\n\n

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Candlestick chart \u2013 Nasdaq 100<\/a> Index (2023)<\/strong><\/td><\/tr><\/tbody><\/table><\/div><\/div><\/figure>\n\n\n\n
\"\"<\/a><\/figure>\n\n\n\n

Past performance is not an indication of future results<\/em><\/p>\n\n\n\n

Source: eToro<\/a><\/p>\n\n\n\n

Point & figure<\/h3>\n\n\n\n

A point & figure chart displays price history as a series of columns made up of either Xs or Os<\/strong>. A rising price is represented as a column of Xs and a falling price by a column of Os. Again, the same underlying price data is being used, but it is illustrated in a different format.<\/p>\n\n\n\n

Support and resistance indicators<\/h2>\n\n\n\n

The terms \u201csupport\u201d and \u201cresistance\u201d refer to price levels on a chart at which the price struggles to break below or above. An upward trend that keeps failing to break<\/strong> above a specific price level is described as \u201cmeeting resistance\u201d.<\/p>\n\n\n\n

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An example of an upward trend can be seen in the Apple<\/a> chart below.<\/p>\n\n\n\n

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Apple price chart with resistance levels (2020 \u2013 2023)<\/strong><\/td><\/tr><\/tbody><\/table><\/div><\/div><\/figure>\n\n\n\n
\"\"<\/a><\/figure>\n\n\n\n

Past performance is not an indication of future results<\/em><\/p>\n\n\n\n

Source: eToro<\/a><\/p>\n\n\n\n

At the same time, some markets have levels at which price struggles to break below. These support levels can be based on technical analysis<\/e-tip> indicators, or even something as simple as a \u201cround number\u201d.<\/strong> In the example below, the UK100<\/a> Index failed to break below the psychologically important 6,800 support price level on four separate occasions.<\/p>\n\n\n\n

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UK100 price chart with support levels (2020 \u2013 2023)<\/strong><\/td><\/tr><\/tbody><\/table><\/div><\/div><\/figure>\n\n\n\n
\"\"<\/a><\/figure>\n\n\n\n

Past performance is not an indication of future results<\/em><\/p>\n\n\n\n

Source: eToro<\/a><\/p>\n\n\n\n

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Tip: <\/strong>The principles of chart analysis are the same, though longer-term price charts give a better idea of underlying trends.<\/p>\n<\/div><\/div>\n\n\n\n

Trends and trendlines<\/h2>\n\n\n\n

Identifying and backing a trend<\/a> are among the most important aspects of trading<\/strong>, and many investors will use price charts to help them achieve this. This simple technique involves identifying trend lines that track an underlying move in price.<\/p>\n\n\n\n

These can be upwards or downwards, and the point at which the price touches an established trend line can serve as an optimal entry point<\/strong>, assuming that the trend holds. This is clearly outlined in the example below.<\/p>\n\n\n\n

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Upwards trendline in copper<\/a> (2021 \u2013 2022)<\/strong><\/td><\/tr><\/tbody><\/table><\/div><\/div><\/figure>\n\n\n\n
\"\"<\/a><\/figure>\n\n\n\n

Past performance is not an indication of future results<\/em><\/p>\n\n\n\n

Source: eToro<\/a><\/p>\n\n\n\n

All trends come to an end, and this point is marked on the example chart below by a trend line break. This is usually a signal to exit out of positions, and a reminder that reversal in trading activity can create a trend heading in the opposite direction<\/strong>.<\/p>\n\n\n\n

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Trendline break in copper with new downwards trend forming (2021 \u2013 2023)<\/strong><\/td><\/tr><\/tbody><\/table><\/div><\/div><\/figure>\n\n\n\n
\"\"<\/a><\/figure>\n\n\n\n

Past performance is not an indication of future results<\/em><\/p>\n\n\n\n

Source: eToro<\/a><\/p>\n\n\n\n

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Tip: <\/strong>A trend is considered \u201cconfirmed\u201d when there are at least three incidences of price touching the line and rebounding.<\/p>\n<\/div><\/div>\n\n\n\n

Final thoughts<\/h2>\n\n\n\n

Chart analysis cannot help you to establish if an asset is over or undervalued in terms of fundamental analysis. However, studying price moves and analyzing chart data can help you<\/strong> to form a considered view on which direction price is heading. <\/p>\n\n\n\n

The approach can be used independently or in conjunction with other investment approaches<\/strong> to help you understand the best times to buy and sell an asset.<\/p>\n\n\n\n

Visit the eToro Academy<\/a> to learn how to best utilize your price chart analysis.<\/p>\n\n\n\n

Quiz<\/h2>\n\n\n\n
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Which chart type demonstrates opening price, closing price, high price and low price, but also has a \u201cbody\u201d?<\/div>\n
Bar chart<\/div>\n\n\n\n
Line chart<\/div>\n\n\n\n
Candlestick chart<\/div>\n\n\n\n
Point & figure chart<\/div>\n<\/div>
\u00a0<\/div><\/div>\n<\/div>\n\n\n\n\n\n

FAQs<\/h2>\n\n\n\n
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Who should use chart analysis?<\/dt>
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A range of investors and traders study price action. Chart analysis<\/a> supports a wide range of strategies and can be applied to any market. Day traders may consider short-term price charts, but even long-term investors using fundamental analysis can benefit from utilizing charts to identify the best moments to buy.<\/p>\n<\/dd><\/div>\n\n\n\n

What is the best chart time interval to use?<\/dt>
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The best time interval on a chart will depend on the specific approach<\/a> of an investor or trader. If you are running short-term strategies, then you might use chart time intervals of hours, minutes or even seconds. The longer your investment time horizon, the more likely you are to look for indicators on charts that are set at daily, weekly or monthly time intervals.<\/p>\n<\/dd><\/div>\n\n\n\n

What are Heiken-Ashi candles?<\/dt>
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Heiken-Ashi candles resemble traditional candlestick<\/a> patterns but have a smoother appearance and are designed to help traders spot trends. The candles are formatted by applying mathematical formulas to the basic criteria of any candlestick chart to generate different-looking candles. This criterion includes opening and closing prices, as well as interval high and low prices. Heiken-Ashi candles are one of many ways that price data can be represented on a chart.<\/p>\n<\/dd><\/div>\n<\/dl>\n\n\n\n\t\t