Stock Charts
Stock charts are widely used by traders to analyze stocks. Stock charts are so valuable because they give you a visual snapshot of a stocks movement over time. Stock charts are also sometime referred to as historical stock charts. Below is an example of a stock chart. This style of stock chart is known as a bar chart. A bar chart consists of four elements and is sometimes referred to as an OHLC chart. OHLC is short for "Open", "High", "Low", and "Close".
Traders use charting stock trading software to construct the charts of the stock they wish to analyze. I like to look at different chart timeframes to gain a variety of perspectives on a stock movement. The chart below is a longer-term weekly chart.
The chart below is a daily stock chart. Daily charts are used by many different type of traders, both long and short term. The chart below also has something else that make charts so useful. I’m talking about the red and blue lines that you see with the stock prices. These lines are known as indicators. The simplest way to think of it is that an indicator "indicates" something about the movement of prices on the charts. For instance the last few bars on the daily chart below are above the blue line. Prices above the blue line are an "indication" of an uptrend wheres prices below the blue line indicate a downtrend.
This particular indicator is called a "moving average". Moving averages are typically used to indicate the prevailing trend on the particular timeframe of the chart.
The other indicator on the stock chart below is also a moving average. The red line on the chart below is a 200 day moving average. This is a longer-term indicator that the blue 50 day moving average. I’ve placed these here to give look at a very basic stock chart.
You can easily get started looking at free stock charts at any number of places. The charts above are from StockCharts.com. In fact StockCharts.com has free stock quotes and charts. BigCharts.com also has some nice free stock charts.
Many traders who read stock charts use a style of charts known as candlestick stock charts. Candlestick stock charts are also known as Japanese candlestick charts. They are said to have been developed by an 18th century Japanese rice trader. An example of a daily candlestick chart is shown below.
A trader’s objectives in studying stock charts is not merely to see what has happened in the past. The trader wants to gain an understanding of the future behavior of a market in order to profit in that market. The proper use of stocks charts can make this possible.