Stock Chart |
A stock chart is a picture of a stocks price history over a period of time. A chart will not forecast the future financial price movement, but can help investors anticipate what is "likely" to happen to prices over time. Charts are used by technical analysts, technical analysis can be applied to stocks, indices, commodities, or futures.
The three most familiar charts that are used are Candlestick charts, bar charts, and point and figure charts. Charts can be viewed in different time frames such as monthly, weekly, daily, and all the way down to minutes. You can find free stock charts online (http://stockcharts.com/charts/), but the price is usually delayed by fifteen to twenty minutes.
To see prices in the minute time frame you are going to need a real time stock chart which can be found with stock chart software, or with your brokerage platform.
Understanding how to read stock chart is not very difficult. Depending on what time frame you are looking at, you can set a chart up to look at the days opening price, high price, low price, and closing price.
It is all a matter of personal preference, some people just like to look at the closing price of the day. Look at a bunch of charts and decide which one you are more comfortable with, then just keep looking at more charts, soon you will be reading a stock chart like a pro.
Charts not only show you the price history, but you can set them up to show many different indicators
such as volume, moving averages, bollinger bands, support and resistance just to name a few. In fact over the years so many indicators have been developed it is enough to make your head spin. Again it is a matter of preference, what you are comfortable with. Personally the less cluttered my stock screen is the better. Many of the great stock traders of the past used very few indicators.
Technical analysis or the study of charts work because it is human nature for people to do the same things over and over again. For example, say you bought a stock at thirty dollars, and the price started to drop as soon as you bought it. You hang on hoping the price will come back and go higher. One month later the price comes back to thirty dollars and you get out of the trade to break even.
This happens all the time to many people, this is how support and resistance areas are created.
The same is true with trend lines. The price is slowly rising higher, pulls back a couple of days and then moves higher. Many traders are watching and waiting for the price to come back to the trend line to buy the stock. Human nature is what makes technical analysis work.
Take the time to learn how to read a stock chart, it is a tool which can help you succeed in your stock market trading.