Line Chart: Definition, Types, Uses, and How to Create One

What is a line chart?

A line chart displays a series of data points connected by a line, most commonly used to show how a value changes over time. In finance, line charts typically plot closing prices at regular intervals (daily, weekly, monthly), producing a clear, simplified view of price history.

How it works

Line charts connect end-of-period values to reveal trends and patterns while filtering out intraperiod noise (opens, highs, lows). Because they focus on closing values, line charts are simple and easy to read, making them popular for high-level analysis and communication. They can be used alone or alongside other chart types (bar, candlestick, point & figure) for a fuller picture.

Types of line charts

• Simple line chart: One line showing a single series (e.g., one stock’s closing price over a year).
• Multiple line chart: Several lines on the same axes to compare different assets or indicators.
• Compound (stacked) line chart: Lines stacked to show cumulative contributions of components to a total over time.

Common uses

• Identifying trends and long-term direction.
• Comparing performance of assets, indexes, or economic indicators.
• Simplifying complex data by focusing on end-of-period values.
• Historical analysis of market reactions to events or policy changes.
• Communicating results to nontechnical stakeholders.
• Basic technical analysis (support/resistance, relative strength), though with limited detail.

When not to use a line chart

Line charts are not ideal when you need:
– Intraperiod detail (open, high, low) for short-term trading decisions.
– Advanced technical pattern detection that requires candlesticks or bar charts.
– Rich, multifaceted visualizations (e.g., portfolio composition, balance sheet items).
– Precision for strategies that depend on intraday volatility.

Pros and cons

Pros:
– Clear and simple to interpret.
– Easy to compare multiple series without clutter.
– Focuses on closing prices, which are often used as a standard snapshot.

Cons:
– Omits intraperiod information (open, high, low).
– Can oversimplify and mask volatility.
– May mislead if intraperiod moves are important.

Parts of a line chart

• Data points and connecting line
• Horizontal (x) axis — often time
• Vertical (y) axis — value scale
• Title, axis labels, legend (for multiple series)
• Optional gridlines and data markers

Example

To show a store’s earnings over a week: days appear on the horizontal axis and daily earnings on the vertical axis. Connecting the daily values yields a simple visual of change and trend across the week.

Creating a line chart

Excel:
1. Enter data with labels/dates in the x-axis column and values in the y-axis column.
2. Select the data range.
3. Insert → Charts → Line → choose “Line with Markers” (or another style).

Google Sheets:
1. Enter and select the data range.
2. Insert → Chart to open the Chart Editor.
3. Under Chart type, choose “Line chart” (or “Line with markers”).
4. Use the Chart Editor to adjust titles, axes, colors, and labels.

Line chart vs. candlestick chart

• Line chart: plots a single value per period (usually close) — best for simplicity and trend visualization.
• Candlestick chart: shows open, high, low, and close per period — better for detailed technical analysis and intraperiod behavior.

Conclusion

Line charts are an essential, user-friendly tool for visualizing trends and comparing time series. Their strength is clarity; their limitation is lack of intraperiod detail. Choose line charts when you need an accessible overview or comparison, and opt for candlesticks or bar charts when you require granular price information.

Further reading

• P. J. Kaufman, Trading Systems and Methods (John Wiley & Sons, 2019).
• E. Ponsi, Technical Analysis and Chart Interpretations (John Wiley & Sons, 2016).