Quick Answer
Technical analysis studies a market's own price, volume, and open-interest history to forecast future moves, assuming price discounts all information and patterns repeat. The four main chart types are the bar chart, the line chart, the candlestick chart, and the point-and-figure chart, which plots Xs and Os and ignores time entirely.
Before the chart types, anchor what technical analysis is actually trying to do and the two assumptions everything else rests on.
What Technical Analysis Is
Technical analysis reads the market's trading history to predict where price goes next, and it starts from two beliefs about that history.
- Technical analysis: studying a market's own record of price, volume, and open interest to forecast future price moves. It focuses on the chart, not the economy.
- Fundamental analysis (the contrast): studying supply, demand, and economic drivers to judge what a market is worth. Fundamental analysis answers why; technical analysis answers where and when. Fundamentals are the next unit's scope.
- Two foundational assumptions:
- Price discounts everything: all known information (fundamentals, news, and crowd psychology) is already reflected in the current price, so the price itself is the data worth studying.
- Patterns repeat: price behavior tends to recur because participants react to similar levels in similar ways over time, so prior levels carry forward as future decision points.
Think of it this way: a technical analyst treats the chart like a trail of footprints. You cannot see why the crowd walked where it did, but the tracks show where it hesitated, where it ran, and where it turned around, and crowds tend to hesitate and turn at the same spots again.
The Four Chart Types
Each chart type packs a different amount of the session into one mark. The exam wants you to know what each one shows and, above all, which one ignores time.
| Chart type | What it plots | Time shown? |
|---|---|---|
| Bar | Open, high, low, and close (OHLC) as one vertical bar | Yes, one bar per period |
| Line | Closing prices only, connected into a line | Yes, one point per period |
| Candlestick | The same OHLC as a bar, drawn as a real body with wicks | Yes, one candle per period |
| Point-and-figure (P&F) | Columns of Xs (rising) and Os (falling) by price movement | No, time is ignored |
Bar Chart
A bar chart plots each period as a single vertical bar showing the session's open, high, low, and close (OHLC).
- The top of the bar is the high; the bottom is the low.
- A short tick on the left marks the open; a short tick on the right marks the close.
- One bar conveys the full range of a session plus where it opened and closed, which is why it is the classic price chart.
Exam Tip: Gotchas
- Open is the LEFT tick; close is the RIGHT tick. Reversing them is the classic bar-chart trap. Read left to right the way the session ran: it opened on the left, it closed on the right.
Line Chart
A line chart connects only the closing prices of each period with a continuous line.
- It ignores the open, high, and low, so it hides the intraday range.
- Because it shows just closes, it gives the cleanest high-level view of the overall trend.
Candlestick Chart
A candlestick chart shows the same open, high, low, and close as a bar chart, but draws the open-to-close range as a filled or hollow real body with thin wicks for the high and low.
- The real body is the distance between the open and the close.
- The body is typically light (or green) when the close is above the open and dark (or red) when the close is below the open, making up and down sessions easy to read at a glance.
Exam Tip: Gotchas
- A candlestick carries the same four data points as a bar (OHLC). The difference is presentation, not information. The real body just makes the open-to-close move visual.
Point-and-Figure Chart
A point-and-figure (P&F) chart plots columns of Xs for rising prices and Os for falling prices, and it is the odd one out because it ignores time.
- Each X or O represents a set amount of price movement, called the box size.
- The chart advances only when price moves by the box amount, so minor fluctuations and idle periods produce no new marks.
- A new column starts only when price reverses by a defined reversal amount (for example, a three-box reversal).
- Because marks depend on price movement rather than the clock, a market can sit flat for weeks and add nothing, then move sharply and add a whole column.
Exam Tip: Gotchas
- Point-and-figure is the chart that ignores time. If a question asks which chart type plots price movement without regard to time, the answer is point-and-figure. Bar, line, and candlestick all advance one mark per period on a time axis.
Memory Aid: On a point-and-figure chart, Xs climb (rising prices) and Os drop (falling prices). Picture the X reaching up and the O rolling down the page.