A Comprehensive guide on Reading Stock Charts

One of the most significant questions that stock market investors, particularly novices, frequently have is how to read stock market charts. Both a technical examination of the stock price and a fundamental analysis of the company are necessary for stock investment. Therefore, if you wish to purchase shares in a particular company, you can assess whether it can survive economic turbulence by looking at its financials, management, competitive environment, etc. Additionally, you can examine how the stock price has responded to market fluctuations over time and spot trends that could aid in your decision-making by using technical analysis, which mostly consists of examining stock charts. Reading stock charts is taught well in trading courses in Ahmedabad and we will discuss here how you can read a stock chart

What is a stock chart?

Plotting the price of a specific stock of a business or index across time is known as a stock chart. The time period (intraday, daily, weekly, monthly, or yearly) is plotted on the X-axis, while the stock price is plotted on the Y-axis. It also stands for additional data that you will require to fully understand the performance of a specific stock in the market. You can make future predictions of the stocks by analysing the past data and buy or sell stocks as per the market trend.

Reading the stock charts

Reading the stock chart properly can make you a good trader as well as an investor because you will be able to predict the price of a particular stock with more accuracy. Below are some of the aspects you must see while reading a particular stock chart

• Exchange and stock symbol

The firm name, the stock symbol (also known as the ticker), and the name of the exchange where the share is traded are all located on the upper left corner. This is the basic aspect of reading a stock chart and is taught in a professional stock trading course from the beginning itself.

• Time period of the chart

Using intraday, weekly, monthly, annual, and multi-year data, the stock chart allows you to examine how the stock price has changed over time. Traders typically search for intraday and daily data to gain insight into short-term market changes. Investors typically use these charts to choose whether to purchase a specific stock right away or wait a few days due to the volatility of the markets. They examine monthly or annual data to identify long-term trends.

• Net Change

You can see how much the prices changed each day by looking at a candle and stick chart. The range (close and opening) of the day’s price movement is shown by the candles in this style of chart (above). Therefore, a lengthy candle body indicates substantial price movement, whereas a shorter candle indicates a more constrained range of price movement. The green candles indicate a net increase in the stock price since the closing price was greater than the opening price. A net decline in the stock price from the opening is indicated by a red candle.

• Volume

Volume is another important piece of information. Moving your mouse the mouse pointer over a certain trading day on a basic daily stock chart will reveal the trade volumes. The volume of a daily chart is the total number of shares of the traded stock. It shows how much demand there is for the stock at a specific price. Less trades indicate that there is little interest in purchasing or disposing of the shares at the specified price. High transaction volumes show that buyers and sellers are actively participating.