How to Read a Stock Chart
- Observe the Price and Time Axes. Every stock chart has two axes - the price axis and the time axis. ...
- Look for the Trend Line. This should be pretty obvious, but a good bit of the information you can glean from a stock chart can be found in the ...
- Identify Trading Volume. In addition to just the trend of the stock's prices, the stock's trading volume is another key factor to look at when reading a stock chart.
- Identify Lines of Support and Resistance. Still, another important aspect to examine on a stock chart are lines of support and resistance. ...
- Identify the trendline. This is that blue line you see every time you hear about a stock — it's either going up or down right? ...
- Look for lines of support and resistance. ...
- Know when dividends and stock splits occur. ...
- Understand historic trading volumes.
How to properly read and interpret trading charts?
Let me break down the image above with each of the trend lines:
- Line A is the very first line of support shown. ...
- Line B is my first line of resistance. ...
- As you can see with Line C, the stock has bottomed out again, thus creating a new line of support.
- Line D shows the stock price has increased significantly and I’m comfortable establishing this as a new line of resistance.
How to read stock charts for beginners?
Important things to know when learning how to read a stock chart
- Identify the trend line. This is that blue line you see every time you hear about a stock – it’s either going up or down right?
- Look for lines of support and resistance. The next thing you’ll want to look at is the lines of resistance and support. ...
- Know when dividends and stock splits occur. ...
- Understand historic trading volumes. ...
How to make easy to read stock charts?
When looking for stock chart software, here is what you should consider:
- Lines – can the stock chart software support vertical, horizontal and trend lines? ...
- Symbols – the best stock chart software should have a good library that enables you to load images as symbols. ...
- Line studies – good software should provide pre-built support for line studies. ...
How do I read the stock market charts?
Method 1 Method 1 of 2: Reading the Parts of a Candlestick
- Note that the market price is going up if the candlestick is green or blue. ...
- Recognize that the market price is going down if the candlestick is red. The color of the candlestick is usually red if the market is trending downwards.
- Look for the opening price at the bottom of a green candlestick or the top of a red one. ...
How to read stock charts?
So it helps to get your bearings first. From there, you can move on to the more advanced stage of stock chart reading, which involves looking for trading patterns. You can start by identifying the trend line. The trend line on a stock chart is simply a line that connects one price point to another. This line will tell you whether a stock is moving up or down on a given day and how its price has changed over longer periods of time.
What is stock chart?
A stock chart is a graph that illustrates a stock’s movements over time. Specifically, stock charts show you how a stock’s price has increased or decreased.
What does dividend yield mean?
Dividend yield. If a stock pays dividends, its stock chart will include the dividend yield, which measures dividend payouts as a percentage of the share price.
What is candlestick chart?
Candlestick charts. Candlestick charts track the same price information as bar charts but they use “shadows” to track upper and lower price movement patterns.
Why do you use stock lines?
But the purpose of using these lines to identify trends in pricing highs and lows. This can help you decide on the right timing to buy or sell a stock, based on which way you think the price will move next.
Why do we look at moving averages?
You can also look at moving averages to gauge pricing trends and levels of support among investors. By looking at volume and pricing around key moving average points, like the 50-day, 100-day or 200-day marks, you can see whether investors are buying more of a stock, selling it off or simply holding steady.
What is market cap?
Short for market capitalization, the market cap is a measure of a company’s valuation based on the number of shares it has outstanding and the individual price of each share.
What do charts reveal about stocks?
But charts can reveal much more. How much investor interest is there in this stock ? Where is its price likely to find resistance or support? What does the past look like, and is there a connection to the present—or even the future? Have there been previous blips or stumbles?
What is a stock chart?
Stock charts are crucial tools for investors of all experience levels. At its most basic, a chart illustrates the story of a stock’s price moves over time, providing investors with an immediate picture of a company they’re curious about. Charts answer a simple question: Is this stock on an upward or downward path? Sometimes that’s all people want to know.
What color are the bars on a stock chart?
The vertical bars here show the number of shares traded during each time interval. These bars are color-coded green or red, based on whether the stock was up (green) or down (red).
What does a bar chart show?
Bar charts depict a stock’s open, high, low, and close price. The vertical line on a price bar represents the high and low prices for the period. The small left and right horizontal lines on each price bar show the open and closing prices for the period.
What does the red line on a stock chart mean?
Daily trading range. Each vertical line represents one trading day in this chart. Red means the security was down compared to the previous day; black means the stock was unchanged or up. Charts may alternatively use green to represent up days.
What is the ticker symbol on a stock chart?
Chart identification. This is the ticker or trading symbol that identifies the stock, index, or other security in a chart.
What is the P/E ratio of a stock?
If a company earns $10 billion and has 2 billion shares outstanding, its EPS is $5. If its stock price is $60, the P/E ratio is 60 divided by 5 , or 12. This means the stock is trading for 12 times more than the company’s earnings.
Stock Chart Construction – Lines, Bars, Candlesticks
Looking at A Stock Chart
- Below is a year-to-date daily chart of Apple Inc. (AAPL), courtesy of stockcharts.com. This chart is a candlestick chart, with white candles showing up days for the stock and red candles showing down days. In addition, this chart has several technical indicators added: a 50-period moving average and a 200-period moving average, appearing as blue and red lines on the chart; the relat…
The Importance of Volume
- Volume appears on nearly every stock chart that you’ll find. That’s because trading volume is considered a critical technical indicator by nearly every stock investor. On the chart above, in addition to showing the total level of trading volume for each day, days with greater buying volume are indicated with blue bars and days with greater selling volume are indicated with red …
Basic Volume Patterns
- There are four basic volume patterns that traders typically watch as indicators. High volume trading on Up Days – This is a bullishindication that a stock’s price will continue to rise Low volume trading on Down Days– This is also a bullish indication since it indicates that on days when the stock’s price falls back a bit, not many investors are involved in the trading. Therefore, …
Using Technical Indicators
- In analyzing stock charts for stock market investing, investors use a variety of technical indicators to help them more precisely probable price movement, to identify trends, and to anticipate market reversals from bullish trends to bearish trends and vice-versa. One of the most commonly used technical indicators is a moving average. The moving averages that are most frequently applied …
Trend and Momentum Indicators
- There is virtually an endless list of technical indicators for traders to choose from in analyzing a chart. Experiment with various indicators to discover the ones that work best for your particular style of trading, and as applied to the specific stocks that you trade. You’ll likely find that some indicators work very well for you in forecasting price movement for some stocks but not for othe…
Analyzing Trends
- When reviewing a stock chart, in addition to determining the stock’s overall trend, up or down, it’s also helpful to look to identify aspects of a trend such as the following: 1. How long has a trend been in place?Stocks do not stay in uptrends or downtrends indefinitely. Eventually, there are always trend changes. If a trend has continued for a long period of time without any significant c…
Identifying Support and Resistance Levels
- Stock charts can be particularly helpful in identifying support and resistance levels for stocks. Support levels are price levels where you usually seeing fresh buying coming in to support a stock’s price and turn it back to the upside. Conversely, resistance levels represent prices at which a stock has shown a tendency to fail in attempting to move higher, turning back to the downside…
Conclusion – Using Stock Chart Analysis
- Stock chart analysis is not infallible, not even in the hands of the most expert technical analyst. If it were, every stock investor would be a multi-millionaire. However, learning to read a stock chart will definitely help turn the odds of being a successful stock market investor in your favor. Stock chart analysis is a skill, and like any other skill, one only becomes an expert at it through practice…