Line Graph
A line graph is a type of graph that uses lines to connect data points. A line graph is also referred to as a line chart or a line plot. A line graph is the representation of the data points over a certain period of time. Simply put, a line graph is used to show how the quantity or amount of something changes over time. Often these graphs are used in finance and they represent how the price of security/asset changed over a period of time. These time periods may vary from just a tick to several years.
We can compare line graphs with other types of graphs such as pie charts and bar charts. Note, however, that traders prefer using candlestick charts above all others.
Line graphs explained
Line grapes indicate a unit of observation with data points, which reconnect with a straight line. There are several different purposes for using a line graph, but they are extremely useful when creating a visual representation of fluctuations in values over a period of time.
Using line graphs allows traders to compare various assets. Line graphs allow financiers to create a graphical representation of how values and security prices change over a period of time. Line graphs can also be very useful to investors since they help during the analysis of the data and by providing a graphical representation of different trends.
The problem with a line graph is that it's easy for traders to get confused if line graphs contain a lot of different data points. However, utilizing those is not that hard as well, even for traders who just recently got involved in trading. A lot of changes can be performed manually by manipulating the data on both axes. There are two ways for making line graphs; you can either do it manually or use software. Using software makes this process easier, quicker, and the graph created using a software program is going to be more accurate.
Building a line graph
Like many other graphs, the line graph is depicted on two axes. These axes represent different data and points. The x-axis is horizontal and its values stay consistent, whereas the y-axis is vertical and its values depend on the other axis’ s data.
Both axes should be divided in increments. Usually the x-axis represents the period of time. For instance, a line graph can represent the changes in stock prices over the course of a month. In this case, the x-axis would represent a period of time in days, and the y-axis would represent the prices of the stock at a particular day. The line graph usually represents the closing price of the stock.
So, on a line graph, each day would be represented by a specific price. Let’s imagine that the growth of the stock price was noticed on the 5 th day. Let’s say that on the 4th day it was $45 that would lead to the data point at (4, $45). On the 5th day the price increased to $49, which would result in a different data point at (6, $49).
A line allows traders and investors to see how values have changed over a certain time period. Visually, it would result in upward/downward slopes on the chart. If the stock price increases with each day, the line would slope upwards. The opposite would happen if price gradually decreased.
Types of line graphs
There are a total of three types of line graphs. They all differ by the complexity of the data presented in them.
Simple line graph
As the name suggests, a simple line graph is the simplest type of graph that provides a visual representation of data based on one variable. Consequently, this type of graph cannot be used to compare many variables.
Multiple line graph
This type of graph provides a visual representation of two or more variables and allows comparison between those variables. To make the comparison easier for the readers of the graph, lines on the graph differ in color to represent different dependent variables.
Compound line graph
This provides its readers with data about multiple variables, relationships between those variables as well as all the changes overall. Here all the variables are stacked on top of one another.
Parts of a line graph
There are certain attributes that a line graph needs to have in order to be easy to understand, these graphs also considered to be of better quality. These attributes are going to be covered below.
Title. In order to properly explain what is depicted on the graph, it needs to have a title. The reader of the graph is going to rely on the title provided to understand what the graph is representing exactly, unless the information about the graph was previously provided. The title of the line graph should have either a timeframe or a limit of the data depicted on the graph.
Legend. The legend helps traders and investors understand the meaning behind the different colors of the lines; it explains every variable on the line graph.
Data. Data is the information behind the line graph. Data creates the dots on the graph. It is basically the information about the line chart that needs to be put in a form of a table.
Axes. The x-axis is located at the bottom graph and in finances it usually depicts a period of time. The amount of time depicted on the x-axis can range from seconds to several years and even longer. The y-axis is the vertical axis of the graph. It may start from any number including zero.
Line. Finally, the line connects all the data points and it can be either inward/upward sloping if the changes of the data have been either constantly going up or going down. It is also possible to have more than one line to be depicted on the line graph. Having two or more lines depicted on the graph allows the readers of a line graph to compare different data sets.
Making a line graph in google sheets
You can set up your line graph using Google Sheets.
The first thing you will need to do is create two tables with the data that you want to be reflected on your chart. For example, if you need to create a line graph that would show the security price during the course of the week, for that you would need to create a table of data that you will need to depict on your graph. To do so, you can simply type in all the data you need in your Google Sheets. One of the columns in your document would represent the dates or days of the week, and the other would contain the information about the security prices on that particular day.
After creating the tables you need to insert a chart. To do so, go to “insert” on the top bar and click on it. Then click on “Chart”. If you need to choose the form of the line chart, click on the three dots button in the top right corner on your chart, after that you click on “Edit the chart” and on the right you are going to see the Chart editor open, so you simply click on “Chart type” and choose the line chart.
You can also use Excel to create a line graph. If you don’t have Excel, you can go to office.com, sign in, which is free, and you can also use Excel there. You can also use other software, for example, Excel to create combo charts. These charts provide a visual representation of two different variables in different shapes. For example, you’ll be able to see both column charts and line charts.
Ways to use a line graph
There are different tools that can be used to visualize data. There are also several reasons to use a line graph:
Keeping an account of changes in data across time. A line graph provides its readers with information regarding various changes in data during different periods of time. These periods of time can range widely from days to years.
Keeping an account of small changes. The amount of data that can be seen on a line graph and all the small increments on the vertical axis allows the graph reader to see all the small changes that happened over time.
Comparing changes in different groups (meaning data represented by lines with different colors) becomes easy for line graph readers. It makes tracking data much easier.
