The line chart is the most basic form of price chart, developed as a simple way to visualize stock trends over time. It plots only the closing prices of a stock and connects them with a continuous line. The closing price is often considered the most important price of the day as it reflects the final consensus value. Line charts are commonly used in long-term investing and were widely adopted in early financial market studies.
Importance
- Best for identifying long-term trends in price movements.
- Helps traders get a quick overview of market direction.
- Reduces market noise, making it easier to spot trends.
Limitations
- Lacks details such as opening, high, and low prices.
- Not useful for short-term trading or price pattern analysis.
