how to understand share market chart

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Saurabh Guptahttp://karekaise.in
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If you are new to the stock market and want to make profits then choosing the right stock for you can be a tough task? That is why it is important that you trade in the stock only after doing technical analysis of the stock. Now when it comes to stock analysis, charts are very important in that. But here it is difficult for most of the beginners to understand the stock market charts.If you are also in similar confusion, then through this article we will talk about different stock market charts and how to understand share market chart and decide a right trade.

What is stock market chart?


The stock market chart shows the change in the price and volume of a stock over a given period of time. In a graphical chart, the X-axis shows the time interval and the Y-axis shows the stock price changes.

Here the time-period is intraday i.e. from 1 day to a few months. You can select this time frame according to the type of trade you are doing (intraday, swing, position).

Also, different types of charts have been given to you for the type of trade you want to trade, so that you can analyze any stock in a better way.

Types of charts in stock market


Technical experts use different types of stock market charts. However, there are five types of stock market charts that are most commonly used.

  • Line Chart
  • Daily Bar Chart
  • Candlestick Chart
  • Head and Shoulder Chart
  • Point and Figure Chart

All these types of charts have their own characteristics that traders use for their stock analysis and understanding the market trends.

So let us understand these charts one by one in detail and know how you can easily read these charts and get information about the price of the stock.

Stock market line chart

Line charts are the most commonly used charts. It shows the closing price of the stock price over a specific time interval.

Line charts help in spotting price changes and provide a trader with a better understanding of the trend. Here because all the closing prices are added together and the graph is made, so from this chart you can get the information of the closing value of the stock a day before.

This is a reference to the 1 year chart of Infosys Company. To understand this chart, first select the period for which you want to describe the stock price, for that choose one of the time periods given below, like if you want to know about the change in the share price of the company in the last one year. If you want to get then choose 1Y.

After this  comes the time interval (time-frame). It shows how often you want to get information about the changes in the stock price.

The time frame of 1 day has been selected in the above mention for a period of 1 year, from which you can get the difference in the closing price of the stock in a day.

As soon as you set the line chart according to the above information, then you can understand the price difference every single day and understand the trend of this stock in the last 1 year and decide to invest or trade in it.

Since here you cannot know the high and low price of the stock, this type of chart is not beneficial for short-term trades like swing and intraday.

Stock market bar chart

Bar charts are very similar to line charts. But it provides more information than a line chart. Each plot point in a bar chart graph is represented by a vertical line and two horizontal lines are attached to each vertical line.

The highest part of the vertical line of the bar in the chart represents the day’s highest price for the stock. Similarly the lower part of the vertical line gives information about the lowest price of the whole day.

The left extension of the horizontal line shows the opening price of the stock while the right extension shows the closing price.

In the bar, if the opening price is below the closing price, then the bar will be green, on the contrary, if the opening price is above the right extension, then the candle will give red ie bearish price.

Now we know how traders can understand this chart and take their decision.

Set the time-period and time interval as mentioned above. As soon as setting, the bar graph will appear in the chart according to the time interval, now in this bar graph, along with the opening and closing price, you can also know the high and low stock price.

Since this chart shows you all four (high, low, opening and closing) prices of a stock in a period, it is very important for short term traders and intraday traders.

Candlestick chart

Candlestick charts are quite popular among technical experts. Candlestick charts provide the information quite accurately. As the name suggests, each day’s price change is depicted in the shape of a candlestick.

It represents four data points, High, Low, Open, Close.

Candlestick charts help in understanding the trend and price patterns along with the volatility of the trading. Here there is a body opposite the bar with a wick above and below it, due to which the name of this chart is candlestick.

A descending candlestick is usually indicated by red color while rising candlestick is indicated by bright color.

Head and Shoulder Chart

It indicates a movement in the securities and is a reversal chart pattern. The head and shoulders chart is represented by three heights in the graph. The middle height is the highest which is represented by the head and the height of the outer two sides is represented by the shoulders.

Point and Figure Chart

Point and figure charts show the price movements of Stocks, Bonds, Commodities and Futures. In this graph, an X column is formed when the price increases and an O column is formed when the price decreases. It plots the change in direction vs price by plotting the X column and the O column.

how to read stock market chart patterns


To read share market chart you have to follow various steps if you follow all these steps properly, you will be able to understand share market chart easily.

Identify the chart

Identify the chart and find the company logo at the top which gives information about a particular company.

Choose a time window

This can be done on a daily, weekly, monthly and yearly basis. It depends on which mode you choose to watch. Viewing across different timescales will help to examine and identify longer term and short term and consolidation.

Note the summary key

You check the summary key which it will tell you the information of the chart in numerical value which you can read easily. This summary gives you the latest price, moving average price, and traded volume price information.

Track the prices

The chart is divided into two parts Upper and Lower, it provides price information The upper part tracks the price changes of the stock over a period of time.

The stock price is often represented in different colors such that if the stock closes on a particular day, the color may be black. And if the price at which the stock has closed, the color may turn red.

Keep track of traded volume (Note the Volume Traded)

At the bottom, you will find the volume of the traded stock. This will help you determine if a particular momentum is negative or positive in the market with color-coded bars.

It requires careful reading as it does not have a color coded fix. It gives you the movement of closing price along with the closing price of the previous day.

Look at the moving averages

It is the calculation of the average stock price over a time interval, continuously compounded over time. It is an important tool in stock analysis. This is usually represented by a line cut across the chart. This can help in identifying trend patterns and may also have some lag since it reflects the past price.

WHAT DID YOU LEARN TODAY


I hope you have liked my article on  how to understand share market chart. It has always been my endeavor to provide complete information about the future of stock market to the readers, so that they do not have to search any other sites or internet in the context of that article.

This will also save their time and they will also get all the information in one place. If you have any doubts about this article or you want that there should be some improvement in it, then you can write comments below for this. this is only for educational purpose.

 

 

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