An area chart is a graphical representation of data in which the area under a curve is proportional to the magnitude of the data. The area chart is used to display data over time, and it can be used to compare values between different data sets. The different data points represented on the chart can be identified by their colors and shapes. Area charts are a great way to visualize data. Keep reading for an example of an area chart and how to interpret it.
What is an area chart?
An area chart is a graphical representation of data in which the area between two or more lines or curves is filled in with color, shading, or pattern. The total height of the area equals the magnitude of the quantity represented by the data. Area charts are used to display changes over time or to compare values at different points in time. They can also show how a value relates to a benchmark. An area chart is a graphical representation of price data over time. The area between the x-axis and the y-axis is shaded to indicate the price range for that period. The length of the line on the chart corresponds to the duration of that time.
Understand how to read the values on an area chart.
An area chart is similar to a line chart, except that the area between the lines is filled in with color or shading. This makes it easier to see the magnitude of changes over time. An area chart can be used to compare two or more data sets and track trends over time.
To read an area chart, start by finding the horizontal and vertical axes. The horizontal axis shows the units of time, and the vertical axis shows the value of each data point. Next, identify which data set you to want to focus on and find the corresponding points on the chart. Finally, look at how much each data point has changed from one unit of time to another.
How do you identify price patterns in an area chart?
There are several ways to use an area chart as a trading tool, and compare current prices with past prices. If prices are below the previous area, it may be an excellent time to buy. If prices are above the previous area, it may be ideal to sell. Use trend lines to identify support and resistance levels. Buy when prices bounce off support levels and sell when prices break through resistance levels.
One common price pattern on an area chart is a head and shoulders formation. The head and shoulders formation occurs when there is a gradual increase in price followed by a sharp decline, then another gradual increase, followed by another sharp decline. The first decline forms the left shoulder, the second decline forms the head, and the third decline forms the right shoulder. Once the right shoulder has been formed, there is often a sharp increase in price as traders buy into the anticipation of a reversal.
Another typical price pattern on an area chart is a double bottom or double top. A double bottom occurs when there is a sharp decrease in price followed by two smaller decreases that form what looks like two bottoms. A double top occurs when there is a sharp increase in price followed by two smaller increases that form what looks like two tops. When these formations are confirmed meaning that they have occurred at approximately the same level, it often signals a reversal in trend.
Area charts display how a particular variable changes over time or space. The area between the line and the x-axis is proportional to the value of the data at that point. The overall trend of the data can be determined by looking at the trend of the points on the area chart.