Stock Charts

The stock market is a complex system. It’s not as simple as it looks on television or in the news. The big banks and brokers make it appear easy to grasp, but they only want you to think you know what is going on. They don’t want you to understand their schemes and take advantage of them.

For investors who wish to trade stocks, there is no other way than learning about the different tools and indicators used by professionals to read the flow of the market – because we won’t be able to survive long term otherwise. We need all the information we can get our hands on if we plan to profit as traders.

There are two main types of analysis

Fundamental Analysis

A method of evaluating securities by studying economic and financial data and other available information can be reasonably interpreted to forecast a future in which investors could expect to realize profits.

Technical Analysis

Technical analysis uses various tools to examine equity’s price history and forecasts future price movements for trading purposes.

These two ways of analyzing stocks are often confused or considered interchangeable when quite different. Both have their strengths and weaknesses, but let’s only concern ourselves with technical analysis because it is more practical for most people.

Furthermore, it is nearly impossible to develop an edge (i.e., a piece of information that gives an investor a competitive advantage when trading) in the market from reading economic reports, so it is better to focus on what we can use.

Stock charts are tools used by technical analysts

They show us how prices have fluctuated over time, allowing us to identify trends and make forecasts based on patterns (e.g., support levels, trend lines). Stock charts come in all shapes and sizes but generally fall under one of two categories: line or bar charts.

While they display the same information differently, you must get familiar with both types before analyzing stocks. You will need basic knowledge about both types of charts before moving on to more complex analysis techniques.

Line Charts

A line chart displays relevant data in a simple straight line. The information usually takes the form of closing prices over time and can be easily obtained from any website that provides real-time stock quotes. They are the most detailed charts of the two types, making them beginners friendly. Older types of charting services (e.g., Yahoo! Finance) also place volume bars between each point on the graph so you can see how much stock investors traded at specific points on an intraday basis (i.e., during market hours).

It helps determine where support levels lie based on how many people bought or sold shares surrounding those levels during trading sessions. While it’s not essential to check volume when you read stock charts, it is good to get used to watching volume bars fill up and empty like clockwork.

Bar Charts

A bar chart offers more information than a line chart and thus more opportunity for analysis (and mistakes). It contains the same kind of data as a line chart (closing prices over time) but displays them differently by stacking them into columns of no more than five at a given time. We can measure the net change in price during each period. If you use an online broker such as Hantec Markets or Gain Capital Group, they should provide you with the raw data you need to set up your bar charts.

Tip to remember

Identify Trends; To ensure that your stocks are safe investments, you should avoid trading random futures contracts – this means trying to pick individual stocks randomly without knowing what’s going on currently in the industry. Instead, you should identify the market trends and align them with your investment.

To conclude

These are but some of the basics involved with interpreting stock charts, but if you want to develop other skills beyond these basics, start by learning how to read a primary line and bar charts before moving on to more complex variants. Alternatively, you could always hire a professional to do your analysis for you.


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