Stock trading charts are widely available nowadays as free and part of paid-for charting software. Basically, a stock market chart plots the price of underlying instruments like Google’s share over a period of time.
The most common type of stock trading charts are line, bar chart OHLC (open, high, low, and close price), and Japanese candlestick. Each bar or candlestick represents the opening, highest, lowest & closing price. This could be daily, weekly, monthly, or even 5 minutes bar, or candlesticks, depending on the time frame you wish to display.
Most people use OHLC or candlesticks as line charts only show a rough closing price or mid-price.
OHLC Charts
This bar shows the closing price is higher than the opening price.
If the closing price is lower than the opening price, then the open & close horizontal bar will be upside down. On some trading chart software, this will be red.
Japanese Candlestick
The green or sometimes clear/white body candlestick shows the closing price is higher than the opening price.
If the closing price is lower than the opening price, then the open price is the top of the body, and the closing price is the bottom of the body. This will be either red or black in color.
Up Trends
If the price is sloping up and the low is getting higher and higher, then this is an uptrend. You can draw an uptrend line on the stock trading chart by connecting at least two higher lows together. The more this line touches the low or bottoms, pardon the language, the stronger the trend.
Down trends
If the price is sloping down and the high is getting lower and lower, then this is a downtrend. You can draw a downtrend line on these stock trading charts by connecting at least two lower highs together. The more the trend line touches a lower high, the stronger the downtrend.
Support and Resistance
Prices often go into a little trading range or channel. It normally falls to a certain lower price level that’s been achieved before. You can draw a horizontal support line by connecting the low across the chart from left to right. The more times it touches the low, the stronger the support line & price is likely to bounce up.
Once the price starts to rise, it normally goes to the next level that’s been achieved before. This is normally the highest price at that particular time. The more the price touches this high and does not break this line, it is then likely to reverse.
If the support and resistance levels are broken, they become the opposite
- Broken support will become resistance
- Broken resistance becomes support
This is part of your timing strategy for the entry and exit of a trade, even if you want to have a buy & hold-stock strategy. To stack the odds in your favor, you need to look at the charts to see if it’s going (or about to ) in the direction(stock market trend) you want before entering the trade.
Conclusion
Here I have discussed a few facts about stock trading charts, understand this you can get some idea about the stock trading chart. It will help you to read the chart of any stock, also it will help you to understand the direction of the market. To know more read other articles.