What Are Stock Charts and How to Read Them?
Whether you are a beginner in the stock market or a seasoned player, it is always recommended that you should be able to interpret a stock chart.
A seasoned player is able to do that easily since he has been in this field for such long time and can make out about the trends of a stock by taking just one good look at its chart.
But, it is very difficult for a beginner to understand how to read a stock chart.
In this article, I will try to give away the basics of reading the stock charts.
You pick up a financial newspaper or go to any finance website; you will be overwhelmed to find such kind of charts everywhere.
So, what do you look for while looking at these charts? There are many things which can be analyzed if you look at the charts carefully.
Due to the amount of information the charts provide, these charts are used by a lot of analysts for doing technical analysis.
Some of the answers which you can get through these charts are - which stage the stock in, what type of trend is there, is the trend starting or ending, what are the moving averages of the stock, is the chart sloppy or smooth, what are the support levels and resistance levels, how are the volumes of the stock, where are the trend lines etc.
The first and the foremost thing to understand about the stock charts are the trends.
The trend direction can tell you whether the stock prices are going up, down or without any particular trend.
If there is no particular trend, this means that the consolidation stage is in progress.
This is the single most important information you can get from the chart but still most of the time this gets overlooked by investors.
Other important things which should be looked for are the moving averages - short terms as well as long term.
You can use a 20 day moving average or a 50 day moving average to get the short term and long term stock trend.
You can also find the support levels and resistance levels of the stock.
If you see a relatively long term chart and make out a price which was not breached on the lower level, that level denotes the support price.
Similarly, on the upper side, this level is resistance price.
These processes are good indications of probable entry or exit points for that particular stock.
A seasoned player is able to do that easily since he has been in this field for such long time and can make out about the trends of a stock by taking just one good look at its chart.
But, it is very difficult for a beginner to understand how to read a stock chart.
In this article, I will try to give away the basics of reading the stock charts.
You pick up a financial newspaper or go to any finance website; you will be overwhelmed to find such kind of charts everywhere.
So, what do you look for while looking at these charts? There are many things which can be analyzed if you look at the charts carefully.
Due to the amount of information the charts provide, these charts are used by a lot of analysts for doing technical analysis.
Some of the answers which you can get through these charts are - which stage the stock in, what type of trend is there, is the trend starting or ending, what are the moving averages of the stock, is the chart sloppy or smooth, what are the support levels and resistance levels, how are the volumes of the stock, where are the trend lines etc.
The first and the foremost thing to understand about the stock charts are the trends.
The trend direction can tell you whether the stock prices are going up, down or without any particular trend.
If there is no particular trend, this means that the consolidation stage is in progress.
This is the single most important information you can get from the chart but still most of the time this gets overlooked by investors.
Other important things which should be looked for are the moving averages - short terms as well as long term.
You can use a 20 day moving average or a 50 day moving average to get the short term and long term stock trend.
You can also find the support levels and resistance levels of the stock.
If you see a relatively long term chart and make out a price which was not breached on the lower level, that level denotes the support price.
Similarly, on the upper side, this level is resistance price.
These processes are good indications of probable entry or exit points for that particular stock.