Candlestick Trading Blog
December 4, 2007
Stock Market Charts
Stock Market Charts and Other Trading Concepts Technical analysts and/or chartists use stock market charts to analyze a wide array of securities and to forecast future price movements. Chartists use technical analysis which is the research and examination of the stock market and securities as it relates to their supply and demand in the marketplace. Chartists believe that recurring trading patterns can assist them in forecasting future price movements. Chartists use stock market charts along with computer programs and they do not consider a company’s financial data to be of significance when reading stock charts. Stock market charts are actually price charts. These charts plot technical indicators such as the closing price, moving averages, and trading volume to assist in determining stock market trends. When learning how to read stock charts you should know that price charts are offered with intra-day, daily, weekly, and monthly resolution to provide multiple views of the most recent price data. There are four types stock market charts that are the most commonly used among traders. These include the line chart, the bar chart, the point and figure chart, and the Japanese candlestick chart. Line Chart: Stock market charts such as the line chart is used when the investors considers the closing level to be more important that the open, high or low and also when the open, high, and low data points are not available. Bar Chart: On stock market charts such as the bar chart each bar represents price performance for a specific period. Daily bar charts are the most popular bar charts used when stock charting. The top of the bar represents the high, the bottom of the bar represents the low, and the line sticking out from the right of the bar represents the close. Point & Figure Chart: Stock market charts such as the point and figure charts are used to identify support levels, resistance levels, and the stock chart patterns. These charts ignore the time factor and concentrate only on movements in price. Japanese Candlestick Chart: The Japanese have used candlesticks since the 17th century to analyze the price of rice! The use of candlestick chart patterns was introduced into modern stock technical analysis and is one of the most popular stock market charts used today. Candlestick chart analysis is similar to bar chart analysis accept that it highlights the relationship between opening and closing prices. Candlestick chart formations are much more visually appealing and informative than a standard two-dimensional bar chart. It is important to know when studying stock market charts, that bar charts cannot reflect the difference between a price extreme and a high or low and lack the shadows of a basic candlestick chart, For example, a stock that opened high, but traded low for the day would not be accurately depicted in a bar chart. In a basic Candlestick chart, however, the Upper Shadow would show the extreme of the opening price as well as the trading range for the day. A typical bar chart is simply unable to provide as detailed information when compared to the candlestick chart. Candlestick charts are often the most preferred when deciding which of the stock market charts an investor would like to use. When utilizing stock market charts traders look for the technical indicators. Technical indicators are a series of data points that are derived by applying a formula to the price data of a security. In other words technical indicators, used with one of the above mentioned stock market charts, are what traders use to predict the direction of future prices when stock trading. Technical indicators can be used to confirm other technical analysis tools. For instance, if there is a breakout on the price chart, a corresponding moving average crossover could serve to confirm the stock price breakouts. Before you begin investing in the stock market, it is important to study stock market charts. Understanding the different types of charts, and the methodologies involved in reading them is crucial to investors to become successful traders. Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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