5 Types of Price Charts and Their Histories
By CMM Team - 30-Nov-2023
Open a crypto price chart on TradingView or DEX Screener, and every trader will probably see a green-and-red candlestick chart. By far, this is the most common layout for visualizing price action. But over a dozen other types of chart layouts are available on different platforms.
Novice traders may feel most comfortable using the default chart settings for a while. But more experienced market operators often have one or two other layouts that they strongly prefer. Or they might even rotate through several to get different perspectives on recent price action. Beyond the ordinary line chart layout, this article focuses on five (5) specific types of chart visualizations, their uses and their historical origins.
- Japanese Candlesticks
- Point & Figure
Japanese candlestick charts were reportedly developed in Japan during the 1700s. (This will be a common theme for many of the chart layouts included in this article.) Rice traders used this type of market data visualization tool to track prices, and a trader named Homma Munehisa is largely credited with developing this system, which is also sometimes referred to as a “K-Line” chart.
Sometimes also known as Sokyu Homma, Munehisa became very wealthy and was awarded the rank of honorary Samurai. The popularity of his type of chart increased in the 1900s when western traders were educated about its use for technical analysis of markets.
Candlestick charts are a fairly simple way to visualize market movements. Although compared to other types of charts, this layout is not the ideal way to filter out “noise” from small market movements. But what some traders may consider noise are beneficial details to other traders. Every candlestick basically represents four types of data over a given time period: the opening, high, low, and closing prices. Hundreds of forms of analysis are derived by contemporary traders today based on patterns, structures, fractals, and other data identified from candlestick charts.
Heikin-Ashi charts were created in the 1700s also by Munehisa Homma, the wealthy rice merchant from Japan mentioned above. The name of this style of chart means “average bar,” and the simple goal for this form of market data visualization is to filter out some of the market “noise” that is present in other layouts (e.g., candlesticks).
Heikin-Ashi charts have a smoother visual appearance than other styles of charting because they track price movement ranges instead of every tick. With this type of visualization, price charts present less disordered data. Heikin Ashi charts use average data values, so the closing prices of price bars within a certain time frame are not shown. Knowing this is important for traders who are looking for exact closing prices instead of the averaged prices shown on this type of chart.
Renko charts also originated in Japan. From the 1600s to 1800s, this style of chart was used to monitor rice market data. The word “Renko” comes from two Japanese words – “ren” means “brick” and “ko” means “small.” As this etymology suggests, Renko price bars are constructed as a sequence of bricks.
Bars on a Renko chart are added based on predetermined price range parameters instead of time measurements. So, only after the price has moved by a certain amount will a new bar appear. This format for visualizing market data can help filter out noise and add a smoothing effect to market data visualizations. Also, this format can make monitoring trends easier by providing a clearer perspective on where the market is moving.
Kagi charts were also developed in Japan during the 1800s.This type of market data visualization was introduced to western traders by Steve Nison. Kagi means “key” in Japanese. This name is a nod to one perceived use from Kagi charts, which is to effectively identify key changes in market sentiment.
The design of a Kagi chart is created with vertical lines connected by short horizontal likes. Sometimes the lines are thick and bolded. Other times they are thin. This characteristic is what traders use to derive actionable signals because Kagi charts are mostly independent of time – they do not have a time axis. Kagi charts are not commonly used by mainstream traders and may seem overwhelming at first. But when properly understood, this layout can be helpful for filtering noise and identifying true market trends.
Point and Figure
Point and figure (P&F) charts are over 100 years old and have a well-documented history thanks to various market operators who have written about them. An author called “Hoyle” was one of the first recorded analyst to write about this style of chart in their book called, “The Game in Wall Street.” Other market historians note Charles Dow in the 1890s as the father of this form of charting. Other literature in the 1930s, 1940s, 1960s, and so on contributed to understanding the usefulness of technical analysis derived form this format.
Contemporary P&F charts are shown with Xs and Os – Xs for rising prices and columns of Os for falling prices. But some traditionalists use alternate versions. P&F charts only account for significant changes in price. Volume is excluded from this type of chart. And time can be annotated, but it is not essential to reading the chart.