In technical analysis the technical traders use various types of price charts. The simplest of these types of charts is the line chart which is used to obtain an overview of price movements in the market. In this case it shows the closing prices at selected intervals. Line charts are very clear and facilitate the detection of the most obvious chart patterns but lack the detail level offered by bar charts and Japanese candlestick charts.
In these price charts the points for price are joined by lines. In general the price used is the closing price of the period (which may be 5 minutes, 1 hour, etc..), but it can also display the average price, the buy/sale price, and many other options that vary according the trading platform that we use.
The main advantage of line charts is that they allow the analyst seeing quickly and easily what is the main trend in the market over a period of time. All that the trader needs to do is follow the line drawn in the chart to check whether the market is bullish or bearish. Basically, the line charts indicate the market direction.
The second advantage of this type of chart is that, if the trading platform allows it (that is not always the case as it depends on the broker) and if we choose to see the spread in place of the closing price, we can quickly detect in which times of the day our broker offers high spreads and when it offers a low spread.
In general we can say that the biggest advantage of these charts is that line graphs are very easy to interpret, even for novice traders with little or no experience on the market. They are actually quite intuitive. Despite this, these chats do not offer as much information as other types of graphics.
For this reason, this type of graph is rarely used today because most traders prefer the Japanese candlesticks or the bar charts because they show much more information on any time frame. For example, in the case of candlestick charts, it is much easier to identify price patterns or formations that indicate possible trend changes or the continuation of the curren trend. In fact, the chartist analysis is much easier with the use of candlestick charts. There are formations which are imposible to identify with a line chart.
In summary we can say that line graphs are useful for identifying trends.
Below is a line chart for the EUR/USD: