Have you ever wondered how people make money by trading stocks? It all starts with understanding stock charts. In this article, you'll find a step-by-step guide on how to read stock charts so that you can start making money from the stock market.
Using Stock Charts
Reading stock charts is a skill that can be learned relatively easily and provides information that can be used to make informed investment decisions. The most important feature of a stock chart is the price trend, which can be determined by looking at the direction of the moving average and the volume of shares traded. For example, if the price trend is up and volume is increasing, it indicates that more people are buying shares than selling them, which is bullish sign. Conversely, if the price trend is down and volume is increasing, it's a bearish sign. In addition to trends, other indicators such as MACD and RSI can also be used to generate trading signals. FinanceCharts provides users with a wide range of tools to help them understand and analyze stock charts. The site offers extensive types of finance charts, as well as stocks that are undervalued, overvalued, cheapest, or the best value. You're sure to find a financial chart that's useful to you on the site.
Understanding the Price Scale
The price scale on a stock chart is used to measure how much the price of a security has changed over time. The price scale can be found at the bottom of a chart and it lists the prices of the security along the horizontal axis and the time periods along the vertical axis. The most common time periods are days, weeks, months, and years. The size of each box on the price scale corresponds to a specific price change. For example, if a security's price changes from $10 to $11, then the size of the box on the price scale will increase by $1.00. Conversely, if a security's price changes from $11 to $10, then the size of the box on the price scale will decrease by $1.00. The marks on either side of each box represent 10 percent increments. So, if there is a mark at 10 percent, that means that prices have increased or decreased by 10% from where they were at that point on the scale. Likewise, 20 percent would be represented by a mark at 20 percent, 30 percent would be represented by a mark at 30 percent, etc.
Stochastic Oscillator
The stochastic oscillator is a momentum indicator that measures the location of the closing price relative to its high-low range over a given period of time. It is computed by taking a moving average of the location of the close relative to the high and low, then dividing this value by the total number of periods in the calculation. The resulting number is plotted on a scale from 0 to 100, with readings above 80 considered overbought and readings below 20 considered oversold.
Relative Strength Index
The Relative Strength Index (RSI) is a technical indicator used in the analysis of financial markets. It is intended to chart the current and historical strength or weakness of a stock or market based on the closing prices of a recent trading period. The indicator should not be confused with relative valuation, which compares a company's stock price to its peers.
Learning how to read stock charts is essential if you want to analyze stock data in order to make informed investment decisions. By understanding the trends and patterns in stock data, investors can anticipate changes in stock prices and make more informed choices about when to buy and sell stocks.
