Understanding the use of weekly charts in trading
Let us assume that you are a technical trader; you must be aware of different charts and their durations. Charts with smaller time frames such as the second or minute charts show us a more detailed view while the longer ones like the weekly, monthly, or even longer ones show us a bigger picture about the price action. Hence, this leads to our main topic for today: weekly charts. Weekly charts show us a series of data about a security's price action. And when we talk about these prices, they are usually visual.
Furthermore, the price summary for one week is represented by candles, bars, and points in a line. Weekly charts can come in various forms and types, but the most widely used and common are the candlestick and bar charts.
As its name suggests, a weekly chart will help us visualize what happened in a week. We will visually see the low, high, close, and open for the whole week. If you want to see the daily data, you can check daily charts individually. Thus, we mentioned that more extended charts like the weekly charts show the bigger picture of the trade. Daily charts have a shorter time frame than the weekly charts, but others say that the two are comparable.
Tell me more about weekly charts.
There are three ways to analyze the market: technical, fundamental, sentiment. Since we are talking about charts, this topic falls on the first market analysis: technical analysis. Technical traders maximize the use of charts. They use weekly charts when they want to measure the asset's long-term trend. And since charts are visual, the way they look and what they show will depend on the preference of the analyst or trader who reads and analyzes them.
For instance, there are weekly charts that are candlesticks charts. They will show us the high, low, close, and open for the week. Unlike if it is just a weekly line chart, it will only show us the weeks' closing price. Hence, it depends on the trader. Most of the time, the trader can put weekly charts on their display to compare them to daily and volume charts.
A weekly chart is like a summary of what happened during the week. The day when you traded is not that relevant, but the highest and lowest price out of all those five trading sessions will become the high and low for that wee.
So, why weekly charts?
Choosing which chart you should be looking at depends on which type of trader you are and which kind of detail you are looking for. But if you are looking for reasons why you should try and check weekly charts, we can enumerate one or a few things.
- Broader view. A trader can see the security's price trend broader than those hourly or daily charts. Hence, you will only need 52 weekly candlestick or bar weekly charts to see a whole year's trading. Any trend or pattern that will come out from those will usually last anywhere from a month or to several months - which is more helpful for institutional analysts who look for long-term trading opportunities. On the other hand, weekly charts are more suitable for people who prefer to trade short-term.
- Daily chart combination. We can use both weekly and daily charts at the same time. When we do so, we can confirm a few important things like price trends and buy or sell signals. We mentioned that some people compared weekly charts to daily charts because they can also identify price channels using bullish or bearish trends. However, they can still be different in terms of indicators because weekly charts still display prices for a longer time frame at the end of the day. Sometimes, some indicators may vary from the daily charts. Sometimes, weekly charts can also confirm interferences in the daily price chart pattern.
- For less active traders. Weekly charts are for traders who want to see their investment's long-term trend changes or potential downtrend signals.
Should I use weekly charts?
There is no limit on how
many charts or which charts you want to see and analyze. There are no right or wrong charts. If you
need to see shorter ones, you can see hourly or daily charts, and if you need a
broader perspective, you can check the monthly charts. Maximize the use of
charts to become more profitable.