What Are The Different Stock Charts And How To Read Them
August 12, 2022Investors will be able to understand terms used on stock charts. They will have a better understanding of the data, trends lines and chart patterns. To get the information you are looking for, investors can choose from a variety of chart types. Here are chart patterns PDF, as a free download.
- Line Charts
The most basic stock chart, a line chart, is available. This chart shows the stock’s closing price movements over time. You can view line charts over different time periods, including one day, one month and six months. Or one, five and ten year intervals. Investors can view the stock’s history from inception by using Seeking Alpha’s symbol pages. Traders and short-term investors can see more value in the 5-day or 1-day charts. Long-term investors, however, are more interested in multiyear charts.
- Bar Charts
Investors can use bar charts to provide daily illustrations of four important pieces of data, which include the stock’s.
- Opening price
- Closing price
- It is the highest priced day of the year
- It is the lowest price of day
These data points are linked by a vertical line that represents the high and low prices during a given period. The open and close prices are represented by the horizontal lines to the right and left. Bar charts are usually color-coded to indicate positive or negative price movements (green, black, or red).
Bar charts can be used to track volatility and identify price reversals.
- Candlestick Chart
The candlestick chart presents the same four data as the bar chart (opening, closing, highest and lowest daily prices) but in a more complicated way. These are some of the common features:
“Shadow: This is the thin line, known as “shadow”, which represents the high-low price range.
Green Box: These boxes will either be transparent or green and show periods in which the closing stock price was greater than that of the previous day. This is a bullish indicator.
Red or Pink Boxes: This is when the stock price was lower that the closing price the day before.
You can track the open and closing prices to determine whether there is upward or down momentum.
- Point-and-Figure Diagrams
Point-and-figure charts are used to plot stock price movements without taking into account volume or time. The price movements are plotted vertically using X’s to indicate increases in prices and O’s to indicate decreases. A point-and-figure charts can show trends and patterns but it does not provide insight into timing because it doesn’t take into account the passing of time. These charts are used by investors to confirm signals that can be found on other chart types.
- Logarithmic Charts
Logarithmic charts present price data at a different scale to a traditional linear chart. Logarithmic charts don’t have the same spacing between the price levels. Logarithmic charts can provide greater insight into price movements from certain stocks or securities than linear charts. Investors are used to looking at stock charts that are linear.
Find Support and Resistance
Charting is used by many investors to predict the stock’s price movements between support and resistance levels. A stock cannot fall below the support level because it acts as a barrier. A stock can’t climb to the resistance level if it reaches a higher price. Stocks move between support and resistance until there is more demand or disruption of the trend. Volume increases when there are more buyers for a stock. This is a sign of more demand. In the opposite situation, volume increases when sellers take more profits. This drives down the stock’s price. If the demand or supply exceeds the normal range, the stock may break from its support level or resistance level. Investors use resistance and support levels to pinpoint points on charts where a stock is likely to break away from a trend. Investors can use trend lines and moving averages to identify support and resistance levels.
