Stock Chart Analysis – How Beginners Can Read Stock Charts?

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Stock-Chart

Making the right choice of stock for both investment and trading is hard. You have to invest your efforts and time while finding the right stock for trading. Stock chart analysis helps you a lot to make the right choice.

A beginner who wishes to become a successful trader should learn the right way to analyse stock market charts. In this blog post, we will figure out how beginners should read stock charts.

What is Share Market or Stock Chart?

The first and most important step of trading is to learn about stock chart technical analysis.

A stock chart is a graph that depicts the price of a stock over a specific period of time. Today the advanced stock charts also show the additional data, understanding which you can learn about the current situation of that particular stock.

Stock analysis through technical charts, show you the trading signal and signs of price movement in future, through which you can make the right trading decision. The stock chart helps you to identify the trend reversals and current trends as well. This also helps you to make the right buy and sell decisions.

A Guide to- Stock Chart Reading for Beginners

As we were told above, how important it is to read stock charts or technical charts to be a successful trader. Now it is important you learn about the steps to stock market analysis through technical charts. These steps are:

Detect The Type of Chart:

There are five major types of stock charts about which we will discuss below. You need to identify the chart first and then look at its top. Doing this you will find a symbol or ticker destination which is actually a short alphabetic identifier of the company. While finding the company’s information you should have the correct symbol.

Select a Time Window:

This procedure depends on where you are accessing the chart and you are choosing the view. This can be done on either daily, weekly, monthly or even a yearly basis. Reading the timescale on the chart will help you to detect the short and long-term trends and even to find the consolidation. This helps you to find whether the price is forming above or below.

Note The Conclusion:

You should read the summary key to know the key information which is numerical and help you to read the chart more quickly. This gives you the clue about volume traded, the latest price, and the price moving average.

Try to Track the Prices:

There are two sections of the chart which are the upper and lower section. The upper section of the chart depicts the changes in the price of a stock over a specific period of time. The prices are mentioned in different colours on the stock chart. The ending price of the stock at the closing of the market gets marked in red colour.

Note Down The Trade Volume of Stock:

In the stock chart, the value of the volume of stock traded is mentioned at the bottom. This helps you to detect whether the movement of stock is positive or negative. Also, the colour coding needs accurate and careful reading as it depends on the up and down closing price with the previous day closing price.

Point Out The Moving Average

The average price is the calculation of the stock average price over a certain period of time. This average price gets adjusted with time and is an essential tool in stock analysis. This gets indicated as the line which is cut across the chart. The trend pattern can be identified this way but there is a delay because prices refer to past events.

Major Types of Share Market Charts

Type 1- Head and Shoulder:

This plays an important role in technical chart analysis. This helps to predict a bull to bear market reversal. It signals the movement of securities and also clarifies that if the new trend is going to move against the previous trend.

Type 2- Daily Bar Charts:

This is another important chart that is commonly used by every trader and investor. This provides essential information about the stock and prices. It depicts the closing and opening price of the stock. It also shows what is the highest and lowest price of the stock on a particular day.

Type 3- Line Chart:

This is the most basic type of technical chart which uses only a single type of data point to form the whole chart. This depicts the stock’s closing prices or an index. Each closing price is denoted by a dot, and a line then connects these various dots (which indicates closing price). It is a simple chart and hence helps the traders to get the perfect picture of a particular stock.

Type 4- Candlestick Chart

Candlestick chart contains different colours of candle-like patterns. Candles in this chart can be denoted as the bearish or bullish candle which are in blue/green/white and red/black colours. The central real body of the candle indicates the opening and closing price. The upper shadow indicates the high point to the close. The lower shadow indicates the low point to the open.

Type 5- Point and Figure Chart

It is a graphical representation of the stock prices. Like other time-based charts, the point and figure chart doesn’t plot the price against time. This plots the price against changes in direction by plotting a column of X’s, when the price goes high, and a column called Os when the price falls down.

Conclusion

Here we described stock technical analysis. The techniques you learned in this blog will help you to read stock charts in a more accurate manner, which will give you a better understanding of the stock market. 

Stay connected with us for more trading and stock market-related updates. Also, remember that the past performance of any stock doesn’t correlate to the future indications of price. The stock market is an uncertain place to deal with it. Hence, we help you to keep you updated with all its necessary elements. Stay tuned and share your queries in the comment section below. 

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