Vertical Line Charting

A graphical representation of the various price points of a given asset over a given period of time

What is Vertical Line Charting?

Vertical line charting is a graphical representation of the various price points of a given asset over a given period of time, which may vary from 15 minutes or five years. A continuous line is used to connect a series of data points, and the resulting line reflects the overall trends in price movement.

 

Vertical Line Charting

 

A vertical line chart is a very basic type of chart used in finance and is used to depict a security’s closing prices. A line chart can be used for any timeframe, but typically, technical traders and market technicians record day-to-day price changes and chart them. The price trends of a security are thus tracked and used to forecast future price movements.

 

Summary

  • Vertical line charting is a graphical representation of the various price points of a given asset over a given period of time.
  • A continuous line is used to connect a series of data points, and the resulting line reflects the overall trends in price movement.
  • Vertical charts convey a large amount of information in simple-to-plot and easy-to-read graphs and hence provide clear visual information about the market.

 

Understanding Vertical Line Charts

Vertical line charts are also called “close-only charts.” It is because only the closing prices of securities are plotted with dots. The security’s daily price action is summarized with a vertical bar. The security’s highest and lowest prices during the trading day are denoted by the top and bottom of the vertical line.

 

Advantages of Vertical Line Charting

  • Vertical line charts are extremely simple to plot and easy to read since they provide clear visual information about the market.
  • They also form the basis or starting point for more complex technical assessments, such as swing charts and Kagi charts. Thus, vertical line charting is an “initial assessment” tool.
  • They convey a large amount of information to seasoned market practitioners. Vertical line charts also provide information about trend line, dominant support and resistance levels, and chart patterns. The patterns are bounding lines that represent the price movement of a security, which provides valuable insight to traders.
  • They are important as price forecasting, or volatility measurement, is one of the most important parts of risk analysis. Any potential investor would want to look at the vertical line charts of a particular security to evaluate the amount of risk associated with investing in that security.

 

Disadvantages of Vertical Line Charting

  • Vertical line charts do not give a complete assessment of trading prices since the highs and lows in prices are not accounted for. However, closing prices are still considered the most important indicators of the strength of a trading period.

 

Related Readings

CFI offers the Certified Banking & Credit Analyst (CBCA)™ certification program for those looking to take their careers to the next level. To keep learning and developing your knowledge base, please explore the additional relevant resources below:

  • Advanced Technical Analysis
  • How to Read Stock Charts
  • Speed Lines
  • Point & Figure (P&F) Chart

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