What is Vertical Line Charting
Vertical line charting is a technique used by technical traders and market technicians to track the price trend of a security in order to forecast future price moves. In vertical line charting, a security's daily price action is summarized by a vertical bar. The security's daily high and low prices are denoted by the top and bottom of the bar, respectively, while its opening and closing prices are indicated by very short horizontal bars to the left and right of the vertical bar, respectively. Vertical line charts are valued because they are simple to plot and easy to read while still providing valuable and clear visual information about the stock market.
BREAKING DOWN Vertical Line Charting
Vertical line charting is generally the simplest and most commonly used type of charting when analyzing the stock market from a technical standpoint. There are three main types of charts used for plotting and understanding the stock market: line charts, bar charts and candlestick charts. Line charts appear as their name implies, with vertical lines that represent the corresponding securities over a certain time period, such as 15 minutes. Vertical line charts may also be referred to as close-only charts because they plot the closing prices of a security with dots connecting the close prices of all the stocks.
Vertical line charting may appear simplistic, but a line chart can convey a wealth of information to seasoned market practitioners. A line chart generally forms the basis upon which more advanced technical analysis is carried out for a security, so it is a useful tool as a starting point for initial assessment. Vertical line charts were favored by Charles Dow, who believed that the closing prices of the stocks were the most important information to show the strength of the trading period.
Example of a Vertical Line Chart
A vertical line chart works by plotting the time that a stock closed, plotted left to right along the horizontal, or x-axis. Alternatively, the price levels may be plotted vertically on the y-axis from bottom to the top. Vertical line charts can provide information about dominant support and resistance levels, trend lines and chart patterns but the charts do not provide highs and lows in prices, so they not give a full assessment of the trading prices. Unlike vertical line charts, bar charts and candlestick charts, however do display both the opening and closing prices.