What is a chart analysis?

The concept of chart analysis refers to the graphical way of predicting the future of the financial markets, in addition to the values ‚Äč‚Äčthat compose them. It basically consists of the analysis of the figures that make up the share prices as an indication of the trend that can follow in the shortest period of time.

The term chartista is an Anglicism from the word chart, which translated into Spanish means graphic.

Aspects of chart analysis

For the chart analysis to be successful, it is necessary to specify three aspects that always happen so that the figures of the prices can be repeated and in this way predict their evolution.

  1. Prices fluctuate based on trends in their value.
  2. The market generates extensive information that causes constant changes.
  3. The figures are repeated over and over.

The concept of chart analysis makes us always pay attention to essential aspects of the market to be able to make predictions of the movements. This implies that if we are aware of something that always happens in the market, we would take advantage of that information to sell or invest at the most appropriate time.

Figures of chart analysis

Two typical market movements or figures are distinguished in the chart analysis according to the two types of trends that exist:

  • Trend Continuation Figures - The market trend is holding, which means that after the move is made the trend type will be the same as before. These types of figures usually occur as a solution to market adjustments after a strong situation in the stock market. Among the most common shapes are rectangles, triangles, and gaps.
  • Figures of trend change: a trend change will mean that it goes from bullish to bearish or vice versa. In this type of figures, the volume of stock trading during the first one will be much higher than if it goes from bearish to bullish. Among the most frequent figures are shoulder-head-shoulder, rounded roofs and floors, and double and triple roofs.

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