What is a Daily Chart?

Key Highlights

• A daily chart provides a visual representation of a stock's price movement within a single trading day.
• Daily chart offers three main types- bar charts, candlestick charts, and line charts.
• These charts are customisable to different time frames, including minutes, hours, weeks, or months.

Daily Chart Meaning

Daily charts serve as essential tools for technical traders aiming to capitalise on both intraday price fluctuations and longer-term trends. A daily chart can either focus on a security's price action within a single day or provide a comprehensive overview of its daily price movements over a specified timeframe.

The increasing popularity of candlestick charts among traders is attributed to their simplicity in conveying fundamental information. This includes opening and closing prices, along with the trading range for the chosen time period.

However, candlestick formations vary depending on the time frame used for chart creation. Traders have the flexibility to graph price charts by selecting time frames ranging from one minute to one year. The most commonly used intervals are hourly, daily, weekly, and monthly. Many technical analysts opt for a combination of intra-day and longer-term charts for comprehensive trading analysis.

Intraday charts depict a security's price movement from market open to close. Analysts can specify candlestick display time frames in these charts through their trading system settings, with common intervals being five or ten minutes per candlestick. The real-time formation of candlestick bars on the chart is based on the specified settings.

Types of Daily Chart

The three common types of charts are line, bar and candlestick. Let’s understand them in detail:

1. Line charts Line charts have the stock price or trading volume on the vertical axis (y-axis) and the period on the horizontal axis (x-axis). Line charts are usually created using the closing stock price. Multiple closing prices are combined to represent the entire information in a single line. That is why the chart is known as a line chart.

2. Bar charts Bar charts are similar to line charts. A bar chart consists of a vertical line and two horizontal lines protruding from it. At the top of each vertical line is the highest price the stock reached during the day, and at the bottom is the lowest price. The left-hand horizontal line represents the opening price, and the right-hand horizontal line represents the closing price.

3. Candlestick Charts Traders widely prefer candlestick charts for daily analysis as they efficiently convey essential information like opening and closing prices, along with the day's highest and lowest values.

A candlestick comprises two key components: the body and the wicks. The upper wick's tip signifies the highest trading price of the day, while the lower wick's tip represents the lowest trading price.

The body, or block, reflects the opening and closing prices. At the top is the price that is higher than the opening and closing prices. The lower of the two prices is at the bottom of the body. A green/white candle represents the opening price, while a red/black candle represents the closing price.

Uses of Daily Chart

Day traders often incorporate daily charts into their trading setups, covering various time frames simultaneously. For instance, day traders might use two monitors to track trades on an hourly basis and review trading activities over the past several days. This approach enables traders to gain a comprehensive understanding of a security's trading behaviour.

Daily charts serve as the primary information source for day traders. There is a common practice of combining candlestick formations with technical patterns and alerts in trading systems. Traders can customise their price charts by incorporating channels and a range of signal alerts, allowing them to identify potentially profitable trading opportunities.

Conclusion

Daily charts show the price movement of stocks on the share market in a visual format. It's represented by the price movement of the stock over time. Line, bar, and candlestick charts are the three types of daily charts. After you learn how to read daily charts, you can play around with various technical indicators to spot trends, buying and selling patterns, etc. You'll be able to make better financial decisions with these insights. If you're new to stock trading, you can learn how to read a daily chart using educational resources provided by reputable financial providers.