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Nifty Charts : How to read and use them ?

Stock charts are representations of the underlying technical analysis of stocks and other financial instruments. Many consider these as essentials for understanding the patterns and reasons for stock price changes. They provide all the key market information and often form an important supplement to base their trades. The Nifty chart is one such representation used for the index representing changes in the Nifty 50 listed on the National Stock Exchange (NSE).

Charts and the market

Market data are often graphically depicted in Nifty charts through two ways, the OHLC chart or the candlestick chart type, the latter being more popular among day traders in the stock exchange. Both these charts show the same market data. The data consists of high, low, opening and closing prices for a particular time frame.

OHLC charts

The open-high-low-close chart (or the OHLC chart) typically shows movements in the price of a financial instrument like a stock over time.

  • The vertical lines on this bar chart show the highest and lowest prices over one unit of time. For example, the price range of the stocks of the Nifty 50 companies over one hour or one day.
  • Tick marks project from either side of the bars. The tick on the left indicates the opening price and the tick on the right side of the bar indicate the closing price for the time period.
  • The bars are at times in different colours, which indicate whether the stock prices rose or fell during that time period.
The high-low-close chart (or the HLC chart) is a simplistic version of the OHLC chart. This chart identifies the range of the price action in the time unit. The range is from the highest price to the lowest price. It also captures the end result of this price action or the closing price for that time period.

For technical analysis, OHLC charts are frequently combined with other chart types such as line charts, which show the moving average, column charts that indicate the trading volume, and range areas, which are called Bollinger Bands.

Candlestick charts

The market data is also represented in the form of the Japanese candlestick chart. Here, the opening and closing prices of the financial instrument defines a rectangle that lies within this range for a time unit.

  • Each candlestick has a wick. The top of the wick represents the highest traded price. While the bottom of the wick represents the lowest traded price.
  • The rectangular region in between represents the opening and closing trades
  • Digitally displayed candlesticks in charts come in various colours indicating higher closing and lower closing
Often day traders prefer this because they show the "live action" or current price movements, which are indicated by the expansion and contraction of the candlestick's body. They consider this easier to follow and also trade upon than the OHLC chart.

Accessing them online

There are many finance and stock market-related websites including the official NSE website that have up-to-date information regarding the market performance in these chart types. Apart from financial instruments like securities, it can also indicate the changes in various indexes like the nifty index.

Apart from being an invaluable source of important market information, seasoned market players in the bse and nse consider reading these charts as an art and novices may need to devote time to become well-versed with the nuances involved in using them to base trades and strategically use them to work to their advantage.

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