Stock Charts Basics
Stock chart describes price changes over time and looks very similar to other kinds of graphs.
The stock market is constantly being evaluated by newsworthy events, earnings reports, outside influences and other factors.
So it’s important to use financial data to track stock prices as well as their related information effectively.
Purchasing shares of stock in companies can be an excellent way to provide financial security especially as it allows you to have some control over your financial future.
However, if you aren’t careful, you can lose all of your money very quickly! Knowing how to read a stock chart is vital to making sure that doesn’t happen to you.
How to predict stock charts and how to read stock charts for day trading. Here we narrowed 5 simple steps. This will ensure you know how to read a stock chart.
So that you can invest wisely and avoid losing everything because of a bad decision.
- The Basics
- Types of Charts
- Reading Stock Charts
- Taking Action
- Final Words
The Basics
Trading stocks used to require that you be a pro or have access to one. Fortunately, today you can use stock analysis software, graphs and charts that even amateur investors can learn from.
Traders still need some practice in order to fully understand how stock charts work. But using stock charts is no longer out of reach for average investors.
Keep reading if you want more information on how chart patterns work and how they can help you.
Types of Charts
There are many different types of stock charts, but they typically fall into three categories,
- Line charts
- Candlestick charts
- Volume weighted average price charts
Line charts simply plot closing prices on a daily basis.
Candlestick charts provide more information about how stocks moved throughout each day.
These form with dots for opening and closing prices, as well as lines for the high and low prices reached during that day.
Volume weighted average price charts are actually based on opening and closing stock prices from all days in which trade occurred. It’s helpful when trying to determine where investors’ sentiment might be heading.
The trick is that you have to know exactly what time period you’re working with when reading stock charts. Because some of them only display a single day or span shorter than a week.
Here are some best website for stock charts. You can check stock charts free through charting softwares like,
or websites like,
if you want to become better at reading stock charts.
They can also help make sense of other aspects of technical analysis such as,
- Trends
- Patterns
- Chart indicators (Moving averages, parabolic SARs and relative strength index)
It’s important to consider several factors including market trends and volume levels before making trades based off stock charts alone.
Reading Stock Charts
Stock charts provide an overview of how a stock is performing.
This might not be as useful for people looking to invest in individual stocks, but it’s very useful for those planning on buying or selling stocks through their retirement fund.
If you’re trying to make money with your investments, it’s helpful to use stock charts as part of your investment research.
Before making an investment, review stock charts and research key numbers of fundamental analysis such as,
- Balance sheet
- Income statement
- Cash flow statement
- Price-to-earnings ratio (which measures how much investors are willing to pay per dollar of earnings generated by a company)
Another important number to consider is return on equity (ROE), which measures profit generation based on shareholder equity.
The higher these numbers, the better positioned a company may be to grow and grow fast.
It’s important to keep in mind that factors such as inflation can impact stock chart numbers.
Just because one stock has high return on equity doesn’t mean another similar one won’t have even higher when adjusted for inflation.
Taking Action
The key to successful stock analysis is doing it.
The more times you take a look at stocks, charts, and financials, the more you’ll be able to tell which parts of financial statements are important and how they relate.
You may not understand exactly what those relationships mean, but your gut instincts will be sharper when it comes time for action.
Focus on learning one chart at a time until they become second nature.
As with learning any language or coding syntax, use each session as an opportunity to teach yourself something new by asking questions and figuring out why certain actions change stock behavior while others do not.
Get in front of a stock price website every day and just start clicking before long, you’ll have real-world experience on hand. This can lead directly into reading stock quotes or getting into data collection projects that give you even more info about stocks that interest you.
If there’s anything we’ve learned from trading is that nobody starts off perfect, the key is moving forward through trial and error before hitting a point where knowledge just clicks without having to make work for it anymore.
Final Words
Investing in stocks can be risky if you don’t know what you’re doing.
Before deciding whether or not stocks are right for you, do your research, speak with an expert and make sure that your investments are within your risk tolerance level.
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When conducting your own stock analysis it is important to take into account all of these factors before investing money.
With years of experience in stock market research at our disposal, we now have easy access to years of data and information about every company out there.