If you are new to the stock market and wondering how to go about it, the first technical aspect you need to understand is the stock chart.
Stock charts are technical representations of a stock’s pricing across its open window. You could use a stock chart to understand whether a stock is currently overpriced, underpriced, the movements, and the pattern it’s following.
Where to find stock charts
Nowadays, most online brokers present stock charts as a standard utility in their apps. One can click a button named “stock chart” or “view chart” to get a visual representation of a share’s price movements.
One can also find stock charts with a quick search on Google. With TradeSmart, you get the stock chart right next to a stock making the whole process faster and efficient.
Importance of stock charts
Tool for stock market investors: One close look at a share’s chart and an investor can tell its peaks and pits, its usual pricing range, performance since the past few years, and more within a few seconds. This saves an investor time, effort, and energy.
Records more than just the price: Stock chart analysis helps with more than just understanding a share’s cost. You can also see the trading volume for a share below the stock chart. With information on trading volumes, you can predict whether a stock is bullish or bearish and plan investments accordingly.
Helps in technical analysis: While stock charts are more useful for traders looking at short-term investments, they can provide information on a share’s basics to long-term investors as well. They help traders evaluate a share’s support levels and resistance levels, and help them set near-term target prices to invest carefully.
While the above points highlight the importance of a stock chart, let us dive into its applications.
Before you get into stock chart reading, you have to understand the various formats of a stock chart.
Stock chart styles – Bars, Candles, and Lines
Line charts: This is a simple 1-d graph useful to get an overview of a share. However, it isn’t particularly helpful for those looking to map everyday changes.
Bar charts: Bar charts denote losses in red and profits in green. Additionally, they also provide info on a share’s opening price and closing price for the day.
Candlestick charts: This chart is suited for intraday traders as it depicts the daily movement of a share better. It is similar in design to bars though the body of the bar is drenched in a color to denote a share’s daily profit or losses.
How to read stock chart patterns
Reading stock charts is beyond merely knowing the prices and volumes. As prudent investors, you should also look out for the following details:
- Preceding highs and lows that go back to 52 weeks at least
- Previous open and close
- Premarket evaluation
Based on these findings one can step into stock chart analysis.
Broadly, there are three stock chart patterns:
Breakout: This is when a share fluctuates between its resistance and support levels and is likely to breach one. Falling below the support level is a breakdown, whereas, climbing the resistance level is a breakthrough.
Reversal: This is when the share is expected to “reverse” its ongoing trend and project an opposite trajectory.
Continuation: This is when a share continues to map its existing levels without much drama on either side.
Now, depending on the shape of the share’s trajectory, there are specific well-documented paths a share is likely to follow.
- The Supernova
- The Cup and Handle
- The Rounding Bottom
- The Double Bottom
- The Double Top
- The Triangle
- The Wedge
- The Flag
- The Head and Shoulders
- The Pennant
- The Spring
- The Gaps
(Note for designer: The above patterns need to be designed like for example this representation of the cup and handle https://th.bing.com/th/id/OIP.bJOkg36cAziEAfwpm4863QHaFL?pid=ImgDet&rs=1)
We hope this article has helped you learn a few things about a stock chart and its working. For more, you can always reach out to our team at TradeSmart. Sign up today!
1) Are share charts useful?
If one knows how to run a share chart analysis, they can find out details on the share’s price movement. Share stock chart reading is among some of the most useful things investors learn.
2) Does TradeSmart provide share charts?
Yes, right above the option to buy a share.