Page 209 - DCOM507_STOCK_MARKET_OPERATIONS

Stock Market Operations

Notes usually be red or black, depending on the site. If the stock’s price has closed above the previous
day’s close but below the day’s open, the candlestick will be black or filled with the colour that
is used to indicate an up day.
Figure 10.5: A Candlestick Chart

Did u know? The Candlestick chart is similar to a bar chart, but it differs in the way that it
is visually constructed.

Point-and-Figure Charts

Bar chartists count on discovering certain buying and selling forces in the market, on the basis of
which they predict future price trends. These forces consist of three factors-time, volume and price.
Members of another school, known as the point-and-figure chartists, question the usefulness of the
first two factors. They argue that the way to predict future price fluctuations is to analyze price
changes only. Consequently, they assert, no volume action need be recorded, and the time dimension
(day, week, or month) should also be ignored. If only significant price changes are important, then
one need only capture the significant (say, one point or more, ignoring all fractions) price changes
in a stock, no matter how long it takes for the stock to register this change.
Figure 10.6: A Point and Figure Chart

It is important that you clearly understand what is being shown on a chart and the information
that it provides. Now that we have an idea of how charts are constructed, we can move on to the
different types of chart patterns.

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