The same is true of open-high-low-close (OHLC) bars or line graphs. Besides understanding stock charts, there are other analytical tools you should use, and a financial advisor can help you find and benefit from these valuable resources. Looking at the long-term price chart is likely to give you the best sense of how the underlying business https://www.bigshotrading.info/blog/fundamental-analysis-vs-technical-analysis-whats-better/ has performed. Stock prices can do just about anything in the short term, but over time they tend to reflect the performance of the underlying business. By understanding the basics of how to read a stock chart, you’ll be able to analyze new stock ideas more quickly and choose which investments are worth digging into further.

Moving averages are the staple diet of any chart reader and enable you to visualize changes in price trends. Moving Averages (MA) is a simple mathematical calculation that takes the average Price (mean) for how to read stock charts a given period and plots this on a chart. The Island Gap occurs when demand is so high that Price and the market participants drive the Price up to unacceptable levels, and the demand dries up rapidly.

Use Trendlines to Determine Price Patterns

The bottom of the base forms the floor of support, which may come at a moving average like the 10-week or 50-day line. Such signs will come in the form of lighter volume on down days and weeks, and heavier buying on the upside. Trading will also start to tighten up, with less volatile price swings. Once the stock settles down, it will begin to move sideways and form the bottom of a base or chart pattern. Investors new to stock investing may wonder if they should use daily or weekly stock charts.

When the Price is above and below the value areas, this represents a possible ideal buying or selling point. Innovative and intuitive, this charting method and standard volume bars can enable you to see market psychology in time and Price. It is also easy to see volume increasing as price rises; this is a very bullish sign.

Can Stock Charts Make You a Better Investor?

Moving average (MA) lines are a graphical representation of past price history. A 200-day simple moving average (SMA) plots a line of the average closing price for the past 200 days. The period you choose for the chart determines the period used for the moving average lines. Getting these basics down can help you make sense of how to read stock charts and interpret the information you’re seeing.

Once you learn what to look for, you’ll see that stock charts and technical analysis give you objective, fact-based insight into key questions that impact your stock investing strategies. But the post I link to above shows you some moving average chart setups you can use for trading. For example, some traders use two moving averages — a slow and a fast. They watch for the lines to cross and this signals them to buy or sell.

What Is a Stock Chart?

Normally, the share price will oscillate between the trendline and the parallel line, enabling swing traders to create potentially profitable trades. Stock charts are a key tool for all investors, but the best way to use them depends largely on an individual investor’s goals, risk tolerance, trading style and investing time horizon. Investors often watch for big spikes in trading volume, as they tend to coincide with insider or institutional buying, important news or a change in a stock’s trend or pattern.

• The Cambridge, England-headquartered tech giant touts advanced chip designs that can be found in nearly all the world’s smartphones.
• A line of resistance measures a price range that a stock is not likely to move above while a line of support measures a price range that a stock is not likely to move below.
• Many different types of charts are available; this one is an OLHC Chart, which means “Open, High, Low, Close.” OHLC refers to the bar itself.
• Country Garden shares jumped 7.87%, while shares of Evergrande rose 7.27%.
• A stock chart visually represents the current and historical stock prices on an X & Y-axis.