Vertical line charting is a tracking technique that is utilized by brokers, investors, and financial analysts to assess the past and projected performance of a given security. As a reliable technical analysis tool, vertical line charting can provide insight into such important components as the high, low, and close of the security within a specified time period. Generally, vertical line charting will be used to create a snapshot of activity for a single trading day, although the concept can be applied to a longer period of time.
The main function of vertical line charting is to provide a simple but technical analysis of the performance of securities. The task of charting helps to create a comprehensive but easy to understand resource that will aid in understanding the movement of the option. When comparing daily activity associated with several consecutive trading periods, the investor or broker can often identify trends with the security. Understanding these trends can make it much easier for the investor to decide whether or not to buy or sell the security.
Along with utilizing the detail of vertical line charting to determine whether to buy or sell a given option, the information can also be used to help identify trends within the wider market. For example, the activity that is reflected by leading stocks within a particular market may in fact reflect the general direction of the market over the short term. This can provide the investor with information that can help with decisions about not only the securities that are charted, but also for stocks that are not charted but are considered part of the same market sector.
While somewhat involved, the process of vertical line charting is based on the collection of historical information that is readily available. By properly arranging and interpreting the data over several days, even a novice investor can begin to understand factors that are impacting the performance of the security. As a result, the investor will be able to make an informed decision about acquiring or selling shares of the option in question.
