Stock charts, also called stock graphs, are a simple and intuitive way to understand the history of individual stocks and synthesize various pieces of stock market information. There are multiple ways a stock chart plots stock prices against time. A common chart shows the daily closing price for the past year. Other charts show daily high and low prices, in addition to the closing price. Still other charts include measures of the volume of stock traded every day.
Technical analysts use stock charts for trading purposes. Most often daily stock graphs are used. There are several trading rules used by technical analysts, which mostly apply to stock price charts. Some charts are ready made and available free on various financial websites. To get more complex charts however, the technical analyst must know how to create stock price charts. The trickiest part of technical analysis is learning to interpret the stock charts. The following list will help get you started:
1. Learn the basic types of stock charts
2. Start creating your own charts
3. Know the various technical trading rules
Action Steps
The best contacts and resources to help you get it done
Learn to interpret daily stock graphs
There are many types of charts used by technical analysts and presented in the financial news. Many of these use special symbols that are difficult to understand without training.
I recommend: Spend some time reviewing all the types of charts commonly found on finance websites, and understand how to create them. Many books about technical analysis exist, but
StockCharts provides a great introduction to understanding stock market charts.
Size may matter with stock charts
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Learn and test the rules of stock tech analysis
Several technical analysis software packages available have built-in rules. These packages can provide live stock charts, which update automatically. Such quick data arrival requires careful implementation of trading rules.
I recommend: Learn the various trading rules and test them with your charts.
Investopedia provides a good overview of the various rules of technical analysis. Once you understand how each rule interprets various stock price trends, you can try implementing them as part of a trading strategy.
Tips & Tactics
Helpful advice for making the most of this Guide
- Technical analysis is only as good as the historical data. Just because there has not been a sharp drop in the stock price does not mean it cannot happen in the future. Also, technical trading rules may be troublesome in highly volatile markets as they can indicate frequent trading which is a leading cause of poor performance among stock traders. Live stock charts can be especially troublesome because the data arrives very frequently. Be sure you're using appropriate trading tools for the type of charts you use.
The official source of Stock Charts is the Stock Charts page at Business.com
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