keyword search

August 22, 2008
Stock Trading Charts
Stock Trading Charts Available to the Investor

Stock trading charts are used by short term stock traders to predict price movements in the stock market. Stock charts are basically price charts that contain a sequence of prices plotted over a set time frame. Technical analysts use these charts to analyze financial securities such as futures, stocks, options, commodities, and currencies, and to forecast future price movements. On every chart, the y-axis represents the price scale and the x-axis represents the time scale. The prices along the x-axis going from left to right. While technical analysis requires the use of stock trading charts, these charts can also be used by fundamental analysts. Fundamental analysts can see the performance of a security over a long period of time as well.

There are four types of stock trading charts utilized by investors. These include the line chart, the bar chart, the point and figure chart, and the Japanese candlestick chart. The line charts are used by investors who see the closing level as more important than the open, high, or low. They are also used when the open, high and low data points are unavailable. Some times only closing data is available for certain indices, intraday stock prices, and thinly traded stocks.

The bar chart is one of the most widely used stockcharts and is effective for displaying large amounts of data. Bar charts are ideal for the stock trader who is interested only in the close, the high and the low, and not necessarily the opening price. The high and the low are represented by the top and bottom of the vertical bar and the close is the short horizontal line crossing the vertical bar.

The point and figure chart is based only on price movement and does not look at time. Only price movements that exceed specific levels are confirmed on point and figure stock trading charts and therefore the focus on price movements makes it easier for the investor to identify support and resistance levels. Stock price breakouts can also be detected when using this type of stock chart.

The candlestick chart is one of the most popular types of charts and is considered to be the most visually appealing stock chart. It originated in Japan hundreds of years ago and was originally used to predict rice price movements. On this chart, the open, high, low and close are all recorded and required and the relationship between the open and close is easier to detect on this chart type. There are white (or green) candlesticks that form when the close is higher than the open and there are black (or red) candlesticks that form when the close is lower than the open. These candlesticks are referred to as the real body. There are also lines above and below the candlesticks that are referred to as shadows, and they represent the high and the low.

Many investors, especially day traders and swing traders, prefer to utilize Japanese candlestick charting methods. This requires the ability to read and identify candlestick chart patterns that indicate what is happening in the markets. Please read more about the doji candlestick and other major Japanese candlestick patterns to further your education.

Online Stock Market Reviews presented live via the internet by Stephen Bigalow
High Profit Candlestick Patterns Book
WORDEN Brothers - TeleChart 2007
The Candlestick Forum Option Training
5-Star Trading Plan

posted by Stephen W. Bigalow at 8:34 AM

------------------------------------------------------------------- -