Stock Charting for Stock Market Success

Important tools of most traders, stock charts provide valuable information regarding various stocks over a certain period of time. The time frame can be daily, weekly, monthly and even annually and is chosen based on two factors:

One, the length of time an investor or trader plans to hold onto an investment, and
Two, how often that investor or trader plans to complete transactions regarding that investment.

Finding and using stock charts is very easy since the majority of online stock broker companies offer the use of these for no charge to their stock charting customers. However, to use these charts effectively, knowledge of what the stock charts contain is necessary. Stock price illustrations showcase market prices and trends for varying types of trading on the stock market. Although there are many types of stock charts, the three commonly used are bar charts, candlestick charts and line charts.

Stock charting visibly displays the complex information regarding predicted market trends and projected price directions. The ability to study charts of varying time frames and use them to predict trends is developed from experience and technical knowledge. Using the charts to interpret market trends is called technical analysis. Essentially, stock charts consist of data obtained from the current changes of value of differing stocks and comparisons with a historic “lookback” time frame.

Line charts consist of a series of dots connected by straight lines. The dots, when combined with market indicators, represent a current price market trend. These type of charts are simple and do not provide enough information to adequately interpret directional trends. Line charts are also not always updated through the end of a trading day, sometimes fizzling out before closing time. However, these charts are often a good starting point, and beginning stock traders tend to use these as they are easy to understand.

Bar charts use bars to visually represent current lows or highs of a stock and have more detail than line charts. These charts help analysts interpret market trends and make predictions about future outcomes. Bar charts portray price fluctuations and if colored, a bar can indicate a rise of fall in the share price.

The most detailed type of chart, candlesticks consist of bars shaped like candlesticks. The different candlestick patterns indicate a range of varying price fluctuations or other movement which is important to future trends of certain stocks. Candlestick patterns are seen as the most dependable chart patterns available for a stock trader to use for viewing projected market trends.

Most experienced traders utilize the skill of stock charting to gain an advantage over other traders. Using just charts for predicting market outcomes is not an easy feat. Many other indicators may often be used in conjunction with charts to accurately analyze stock prices. Stock charts can be found on stock brokering websites, and some are available to potential investors free of charge. For starting stock traders, the best beginning point to learn stock charting is with the more simplified line charts before gaining the experience needed to use the more complex candlestick charts.