How A Line Chart Is Used In TradingA Line Chart is one type of a chart and is the simplest to draw and analyze. It is a line graph connecting stock prices at different time periods that are defined before plotting the graph. A line chart is formed by tracing a line by plotting one price point usually the close of a security over a definite period of time. These dots or price points are connected by the lines the dots over a definite period of time and thus a graph as shown in the figure is created.It is the easiest way to see the movement of a stock that is what is the current situation with respect to the previous. Since it is a linear representation of the fund's performance over time it becomes convenient to interpret. Learn From An ExampleLet us look at the chart of the XYZ Company in the figure. The single line represents the security's closing price on each day. Dates are displayed along the X axis of the chart and prices are displayed on the Y axis. For example the price on 11th April is 89.A line chart gets it's strength from its simplicity. It provides an uncluttered, easy to understand view of a security's price. Line charts are typically displayed using a security's closing prices. Some investors and traders consider the closing level to be more important than the open, high or low. By paying attention to only the close, intraday swings can be ignored. They are also used when open, high and low data points are not available. Sometimes only closing data are available for certain indices, thinly traded stocks and intraday prices.
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