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NISM-Series-XV: Research Analyst · Technical Analysis

Types of Charts in Technical Analysis and How They Are Built

Updated 11 October 2026 · Fact-checked

Technical analysis uses charts to show price history. A line chart joins closing prices. A bar chart shows open, high, low and close for each period. A candlestick adds a coloured body. A point and figure chart ignores time and plots only price moves of a set size. Scales can be arithmetic or logarithmic.

Understand Chart Types and Construction

A chart is a picture of price over time. Technical analysts read charts to spot trends and patterns. Different chart types show different amounts of detail. Your exam tests whether you know what each one plots and what it leaves out.

A line chart is the simplest. It joins the closing price of each period with a line. It shows the broad trend clearly. It hides the open, high and low, so it shows no intraday range.

A bar chart (OHLC) draws one vertical bar per period. The top is the high and the bottom is the low. A small tick on the left marks the open. A small tick on the right marks the close. A candlestick chart uses the same four prices (open, high, low, close). It draws a rectangle called the real body between open and close. Thin lines called shadows (wicks) run to the high and the low. If the close is above the open, the body is usually shown hollow or in a light colour (often green). If the close is below the open, it is usually filled or dark (often red). Colour conventions can vary by platform, so the rule is based on close versus open.

A point and figure chart removes time. It uses columns of X for rising prices and columns of O for falling prices. You choose a box size (the price move each symbol represents) and a reversal amount (commonly three boxes). A new column starts only when price reverses by at least the reversal amount. Small moves and the passage of time are ignored, so the chart filters out noise.

The scale is the vertical axis. On an arithmetic (linear) scale, equal distances mean equal rupee changes. A move from ₹100 to ₹110 looks the same as ₹200 to ₹210. On a logarithmic scale, equal distances mean equal percentage changes. ₹100 to ₹110 (10%) looks the same as ₹200 to ₹220 (10%). Log scales suit long time periods and large price swings.

Key formulas to remember

Line chart
Plots only the closing price of each period
No open, high or low is shown.
Bar chart (OHLC)
Left tick = open; right tick = close; top = high; bottom = low
Four prices per period.
Candlestick body
Real body = range between open and close; shadows = range to high and low
Close above open is a rising candle; close below open is a falling candle.
Point and figure
X = rising prices; O = falling prices; new column on reversal of at least the reversal amount
Time is not on the axis. Box size and reversal amount are chosen by the analyst.
Arithmetic scale
Equal vertical distance = equal absolute price change
Suits short periods and small price ranges.
Logarithmic scale
Equal vertical distance = equal percentage change
Suits long periods and large price moves.

How to solve Chart Types and Construction questions

Use this method for any question on chart types or scales.

  1. 1Read the question and note what is asked: the chart type, the data it shows, or the scale.
  2. 2List the data given: closing only, or open, high, low and close, or a point and figure setup.
  3. 3Match the data to the chart. Close only means line. Four prices means bar or candlestick. No time axis means point and figure.
  4. 4For bar versus candlestick, compare close with open to decide direction. Do not rely on colour alone.
  5. 5For point and figure, check the box size and reversal amount. Decide whether the move is large enough to continue the column or start a new one.
  6. 6For scale questions, ask whether the comparison is in rupees (arithmetic) or in percentages (logarithmic).
  7. 7Check each option for words like only, always, never. Remove options that overstate what a chart shows.

Quickest way: Match the chart to what it plots

When to use it: Use it for definition-style MCQs where you must pick the chart or the feature.

  1. Close only: line chart.
  2. Open, high, low, close with ticks: bar chart.
  3. Open, high, low, close with a body and shadows: candlestick.
  4. X and O columns, no time axis: point and figure.
  5. Equal percentage moves look equal: logarithmic scale.
  6. Equal rupee moves look equal: arithmetic scale.

Common mistakes in Chart Types and Construction

  • Saying a line chart shows the high and low of each day.

    Students assume every chart shows full price range.

    Fix: Remember a line chart joins closing prices only.

  • Mixing up the open and close ticks on a bar chart.

    Both are small side ticks and look similar.

    Fix: Open is on the left, close is on the right, as time runs left to right.

  • Deciding candlestick direction only by colour.

    Colours differ between platforms.

    Fix: Rising means close above open. Falling means close below open.

  • Thinking point and figure columns represent days.

    Other charts have time on the horizontal axis.

    Fix: In point and figure, columns show direction changes, not time. Only price moves of the set size are recorded.

  • Starting a new point and figure column after any small reversal.

    Students forget the reversal amount.

    Fix: A new column begins only when price reverses by at least the reversal amount, such as three boxes.

  • Treating arithmetic and logarithmic scales as the same for long-term charts.

    Short charts look alike on both.

    Fix: Arithmetic shows equal rupee changes. Logarithmic shows equal percentage changes and is preferred for long periods or big swings.

Worked examples

Example 1

A stock opens at ₹250, reaches a high of ₹262, a low of ₹246 and closes at ₹258. Describe how it appears on a candlestick chart and which chart type would show only ₹258.

Show the solution
  1. Compare close with open: ₹258 is above ₹250, so it is a rising candle.
  2. The real body spans ₹250 to ₹258.
  3. The upper shadow runs from ₹258 to the high of ₹262.
  4. The lower shadow runs from ₹250 down to the low of ₹246.
  5. A chart showing only the close of ₹258 is a line chart.

Answer: A rising candle with body ₹250 to ₹258, upper shadow to ₹262 and lower shadow to ₹246. A line chart shows only ₹258.

Example 2

A point and figure chart uses a box size of ₹2 and a three-box reversal. The current column is of X and its top is ₹60. Price now falls to ₹54. Does a new column of O start?

Show the solution
  1. Reversal amount = 3 boxes × ₹2 = ₹6.
  2. Price must fall at least ₹6 from the top of the X column.
  3. ₹60 − ₹54 = ₹6, which meets the reversal amount.
  4. So a new column of O begins in the next column.

Answer: Yes. The fall of ₹6 equals the three-box reversal, so a new column of O starts.

Exam tips

  • Expect direct questions on what each chart plots. Learn the four prices: open, high, low, close.
  • Watch for the claim that point and figure charts show time. It is false.
  • Questions on scales usually test absolute versus percentage change. Link arithmetic to rupees and logarithmic to percentages.
  • Be wary of options with always or only. Chart reading rules have exceptions.
  • Negative marking applies, so skip only if you cannot cut any option.

Practice questions from Technical Analysis

Chart Types and Construction in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Chart Types and Construction: frequently asked questions

What is the difference between a candlestick and a bar chart?

Both show open, high, low and close for each period. A bar chart uses a vertical line with side ticks. A candlestick draws a real body between open and close with shadows to the high and low, which makes direction easier to see.

How do you read a point and figure chart?

X columns show rising prices and O columns show falling prices. Each symbol equals one box size. A new column starts when price reverses by the reversal amount, often three boxes. Time is not shown.

When should you use a logarithmic scale?

Use it for long time periods or large price swings. Equal vertical distances show equal percentage changes, so a rise from ₹100 to ₹200 looks the same as ₹200 to ₹400.

Which chart shows only closing prices?

The line chart. It joins the closing price of each period and does not show the open, high or low.