23 Dec How to Read Stock Charts
Learning about the stock market from scratch is a complex topic and will take a lot of time until you can make your own investments. Until then, you will need a broker’s help to find the right trades for short and long-term profits. The brokers look at the stock market charts to identify the market trends and trigger the buy and sell signals to make quickly calculated investments. There are several types of charts in the stock market, including the head and shoulder, daily bar charts, line chart, candlestick chart, and point and figure chart. To become a good chart reader, here are some useful tips to get started.
Identify the chart
First, you need to make sure you know what type of chart you are reading. Look at the top of the chart, where you will find a ticker designation to identify the company. Make sure that you know the symbol for the company you are looking for.
Choose a time window
Set a time to read the charts every day, week, or month. Looking at the longer time frames will help you plan your trades for longer periods. Note down the trade price on any given day and check for consolidations in the coming few days to identify the growth and decline of the trade.
Check the summary key
You will also need to check the summary key at the bottom of the chart. It is the brief information present in the char in the form of numbers. The summary key should provide the latest price, the volume traded, and the price-moving averages on the chart at any day or time.
Track the prices
The chart is divided into two sections – the upper and smaller lower that will give you an idea of the prices. The “upper” tracks the changes in the stock price over a period where the prices are shown in different colors. If the market for the prices is black, it means that the stock has been closed for the day. The price at which the market closed will be marked as read.
Track the trade volume
At the chart’s bottom, you will find the volume of the stock traded. You can find the momentum of the trade if there is any. These positive and negative changes are marked in color-coded bards. Since the color coding is not accurate, you will need to use your best knowledge to make decisions. The colors refer to the up and down of closing prices as compared to the closing prices of the previous day.
Check the moving averages
The moving averages are the calculation of the average stock price at a time that is calculated every few minutes, hours, or days. It is considered a key element in stock analysis. These will be the lines that will be cutting across the chart. It can identify the new trends in the market and the patterns of the market in the past few days, weeks, or months.