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May 15, 2009
Charting Stock
Charting Stock – The Basics

When learning how to read stock charts there is basic information that you should know. Stock charting is based on the principles of technical analysis as opposed to principles of fundamental analysis. Technical analysis is the method of predicting future price movements, whereas fundamental analysis is based on a stock's intrinsic value. While technical analysis is not fool proof and is open for interpretation, it is a very highly valuable tool for finding profitable trading opportunities. In today's article we will discuss charting stock basics.

Time Frame short term stock trading involves the use of intraday time frames that deals with short term movements. The intraday data is used to build daily price data. Day traders will use a different trading time frame than swing traders. The time frame that you choose to trade in will depend on your trading style and your personality. Be sure to research the different trading times frames, the combination of data as well as the different types of stock charts.

Price – this refers to the type of stock chart that you will use to trade stock. The main three types go stocks charts include bar charts, line charts, and candlestick charts. Candlestick charts are considered among traders to be the most visually appealing, the easiest to read, and they provide the most valuable information when charting stock.

The line chart is the most basic form of price display showing the closing price only for the stock per time period. The bar stockchart displays price using a single bar for each time period and it displays the open, high, and the low. There is also a small horizontal bar that shows the open and close for that trading period. The slender shapes of the bars do allow stock traders to see more information in a time frame.

The candlestick chart is based on the use of Japanese Candlesticks to trade stocks. These charts were originally used in Japan centuries ago in order to forecast the prices of rice! These charts are now the most popular style of price display. Once single candlestick consists of an open, high, low and a close and the body of the candle either black (red) or white (green).

There are advantages and disadvantages to using each of these three charts however, most traders opt to read candlestick charts when charting stock. Once you have decided which stock chart you will use then move on to study technical indicators. Technical indicators include stock chart patterns, moving averages, and most traders use two or three indicators in conjunction with each other for accuracy.

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