What Is a Daily Chart?
A daily chart shows one data point (or candlestick) for each trading day. Each candlestick captures four key prices: the open (first trade of the day), the high (highest price reached), the low (lowest price reached), and the close (last trade of the day).
The body of the candle shows the range between open and close. The thin lines extending above and below (called wicks or shadows) show the high and low. A green candle means the close was higher than the open (bullish day), and a red candle means the close was lower (bearish day).
Why Daily Charts Are the Gold Standard
Professional traders and institutions predominantly use daily charts for analysis. Here’s why:
- Signal quality — Daily charts filter out intraday noise. A moving average crossover on a daily chart is far more meaningful than one on a 5-minute chart.
- Reliability — Indicators like MA150, MA200, RSI, and MACD were designed for daily data. Using them on shorter timeframes reduces their statistical reliability.
- Time efficiency — You only need to check the market once per day (after the close). No need to watch screens all day.
- Emotional control — Watching every tick on an intraday chart triggers emotional reactions. Daily charts give you perspective and time to think.
- Lower costs — Fewer trades mean lower commissions, smaller spread impact, and less slippage.
How Scanance Uses Daily Data
All signals on Scanance are calculated from daily closing prices. Our scanner runs after the market closes each day, computing MA150, MA200, RSI, and MACD values from the daily price history. This means:
- The MA150 is the average of the last 150 daily closing prices.
- The MA200 is the average of the last 200 daily closing prices.
- RSI is calculated from 14 days of daily price changes.
- MACD uses 12-day and 26-day exponential moving averages of daily closes.
Daily Charts vs. Other Timeframes
Let’s compare the daily chart to other popular timeframes:
- Weekly charts — Great for identifying the big-picture trend, but too slow for timing entries. Use weekly charts for context, daily charts for action.
- 4-hour charts — Some swing traders use these for fine-tuning entries, but they add complexity without much benefit for most traders.
- 1-hour / 15-minute charts — Day trading territory. Signals are noisy and unreliable. Requires constant screen time.
- 5-minute / 1-minute charts — Scalping territory. Extremely noisy, high stress, high transaction costs.
Reading a Daily Candlestick
Here’s what different candlestick patterns tell you on a daily chart:
- Long green body — Strong buying pressure. Bulls are in control.
- Long red body — Strong selling pressure. Bears are in control.
- Small body with long wicks (doji) — Indecision. Neither buyers nor sellers are winning.
- Long lower wick, small body (hammer) — Sellers pushed the price down but buyers fought back. Potentially bullish reversal.
- Long upper wick, small body (shooting star) — Buyers pushed up but sellers took over. Potentially bearish reversal.
While individual candlestick patterns can be useful, they’re most powerful when combined with indicators like RSI and MACD. A hammer at an oversold RSI level, near the MA200, is a much stronger signal than a hammer in isolation.