The Purpose of Stock Charts

In this article, we will discuss the basics of chart reading, as well as other interesting facts about the stock charts.

Let’s first define what is a stock chart. This chart shows the price and trading volume generated over a certain period of time. Moreover, it contains other useful data as well.

People who are not familiar with stock trading may find it hard to understand the stock chart. However, it is not as hard as it may appear at first glance.

A person will notice the x and y-axis. The time is located on the a-axis, while the price and volume are located on the y-axis.

Moreover, there are several technical indicators, as well. For example, the moving average (MA) relative strength index (RSI) Bollinger bands, etc.

One of the easiest ways to study a stock chart is to visit websites such as Google Finance and Yahoo Finance.

Stock charts are very useful tools for traders. Thanks to charts, traders can understand the condition of a share. Moreover, it helps to decide when to buy or sell the shares in this or that companies.

There is no unique style when it comes to using stock charts. Traders are using charts for several reasons.

Firstly, a stock chart is a visual representation of a security’s price action. People who are new to stock trading, as well as experienced traders, should remember that it is not recommended to ignore this factor.

Additionally, by looking at historical charts, it will be easier to predict a share’s action in the future. As a result, a trader can decide what to do with the share.

Let’s move to another reason. It is important to keep in mind that charts are a major source of information. Many traders are using this information for their strategies. They will try to find chart patterns, analyze volume as well as identify key price areas to increase their chances.

Understand Support & Resistance levels are price levels at which traders believed to receiver the maximum amount of either buying or selling.

It is not hard to explain the function of support levels. They represent the share price that a company rarely falls below. In such cases, a person can expect more buyers than sellers.

Resistance levels refer to the price point that creates an obstacle for the stock. As a result, the stock’s price is unable to mover higher than that price. In this case, there are more sellers than buyers.

Interestingly, support and resistance play a vital role; they helped to pinpoint the locations of supply and demand on a stock chart.

Furthermore, in the stock trading chart, pattern readings are an important part of technical analysis. Learning how to read the basic chart patterns will help people who are willing to invest in stocks.