Line Break Charts are a Japanese chart style similar to Kagi and Renko Charts , in that they disregard time intervals and only focus on price movements. Line Break Charts are constructed of a series of up bars and down bars referred to as lines.
Obviously up lines represent rising prices, while down lines represent falling prices. A Line Break Chart takes the current closing price and compares it to the closing price of a previous line. The most common Number of Line setting is 3. What this means is that the closing price of the current line is compared to the closing price of the line 2 period's ago. If the current price is higher it is an up line and if it is lower, it is a down line.
If the current closing price is the same or the move in the opposite direction is not large enough to warrant a reversal then no new line is drawn. Very much like Kagi Charts and Renko Charts , Line Break Charts are popular because of the way that they filter out noise and make price movements easy to digest and understand. Some of the typical uses of Line Break Charts are; finding support and resistance , spotting breakouts , and discovering classic chart patterns.
Support and Resistance - Line Break Charts oftentimes reveal areas of support and resistance. Breakouts — Breakouts occur when bars begin to generate in a defined direction after a period of trading within a support and resistance bound trading range. Classic Chart Patterns - Charts that filter out time and only focus on price, such as Line Break Charts, classical chart patterns can often be spotted.
Source - Determines what data from each period will be used in calculations. Close is the default. Reversal OF Line — This value sets the which previous line to compare the current line to. Each new closing price has three possible outcomes 1. New Line , Same Color - When price extends in the same direction. New Line , Different Color - When the price change is large enough to warrant a reversal. No New Line - When price does not change or the reversal is not large enough to warrant a new line.
The user defines the Number of Line value. The current close is then compared to a previous line close. If 3 is the user - defined value then the current close is compared to the close 2 lines ago the current line plus the 2 previous lines makes the total 3. The appropriate line is then drawn or not drawn based on the above guidelines. Retrieved from " https: Navigation menu Personal tools Log in.