How To Read a Stock Chart: A Beginner’s Guide + Stock Chart Glossary

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A stack of old-school machine and tv screens show illustrations of different types of banal charts, alluding toward a instruction successful really to publication a banal chart.

Table of Contents

  • Elements of a Stock Chart
  • Reading Stock Charts: Basic Terms To Know
  • Types of Stock Charts
  • Analyzing Stock Trends

Reading banal charts mightiness consciousness intimidating if you’ve ne'er looked astatine 1 before. Don’t beryllium frightened away, it’s simply a ocular practice of data.

In fact, reference banal charts mightiness consciousness for illustration reference different language. In a way, it is—but erstwhile you understand nan basics, it’s a batch simpler to go fluent than you mightiness think. 

A banal floor plan is simply a chart that shows nan price of a stock complete a definite play of time. It allows you to gauge a stock’s existent and past capacity and forecast really it mightiness execute successful nan future. Knowing really to publication banal charts is simply a awesome accomplishment to person successful your arsenal erstwhile it comes to choosing nan correct stocks and making much informed investing decisions overall. 

In this post, we’ll locomotion done banal floor plan basics, comparison 3 different types, and explicate really each displays an investment’s performance. 

Keep reference to study really to publication a banal chart.  

1. Understand nan anatomy of a banal chart

Learning really to publication banal charts becomes easier erstwhile you break it down into individual parts. Let’s usage Alphabet’s (aka Google, GOOG) banal chart arsenic an example, taken from Google Finance.

An old-school machine surface displays an image of Alphabet’s (or Google’s) banal chart, pinch 5 of nan basal banal floor plan elements highlighted and labeled, each successful nan sanction of knowing really to publication a banal chart.

The floor plan supra is filtered by 1 day, truthful it’s showing Alphabet’s banal capacity complete nan people of August 22, 2022. You tin select nan clip shown by days, months, aliases years.

Here are immoderate basal banal floor plan elements to cognize and announcement astatine first glance:

  • Ticker: you tin find immoderate company’s banal floor plan by searching nan company’s ticker—the drawstring of letters shown adjacent to nan institution name, “GOOG” successful Alphabet’s case.
  • Current price: nan current price is nan past value a banal was traded for during regular trading hours—9:30 a.m. to 4 p.m. Eastern Time. After trading hours nan value will bespeak nan closing value astatine nan adjacent of nan past trading day. Here we spot nan existent value is $115.15, down 2.51% since nan markets opened astatine 9:30 americium ET connected August 22. 
  • Previous close: this is nan closing value of nan erstwhile trading day. Here we spot nan banal value was $118.12 astatine nan marketplace adjacent connected August 21.
  • Y-axis: nan vertical axis shows prices successful dollars. 
  • X-axis: nan horizontal axis shows nan magnitude of clip for your chosen period.

2. Grasp basal position connected a banal chart

In summation to nan floor plan line, present are immoderate cardinal position to cognize erstwhile learning really to publication banal charts: 

  • Open, high, and low: the unfastened is nan value a banal trades for astatine nan opening of nan day, and nan precocious and debased are nan highest and lowest prices a banal trades for during those hours.
  • Previous close: the closing value of nan erstwhile trading day. 
  • Market cap (market capitalization): this is simply a measurement of a company’s worth based connected their full shares of stock, recovered by multiplying nan astir caller stock value by nan number of full outstanding shares. 
  • P/E ratio (price-to-earnings ratio): this is simply a measurement of a company’s worth utilized to gauge whether a banal is over- aliases undervalued, expressed arsenic a ratio betwixt a company’s banal value and its earnings.  
  • Dividend yield: this is nan magnitude paid to an investor successful dividends, expressed arsenic a percent of nan banal price. 
  • 52-week range: this is nan highest and lowest value a banal has traded for successful nan past twelvemonth (or 52 weeks). 

Once you’ve grasped nan basics outlined above, you’ll yet want to understand nan further position below. You’ll apt tally into them erstwhile you move onto much precocious charts, and they supply adjuvant discourse erstwhile it comes to knowing really to publication banal numbers. 

  • Bid and inquire price: the bid is nan highest value an investor is consenting to salary for a stock of stock. The inquire is nan lowest value an investor is consenting to waste a stock of banal for. A smaller dispersed is mostly seen for banal shares pinch precocious trading activity—meaning location are a batch of buyers and sellers. 
  • Volume and mean volume: volume tells you nan number of shares that are presently being traded that day. The mean measurement is conscionable what it sounds like—the average number of shares that were traded during a day.
  • EPS (TTM) and net date: short for earnings per stock (EPS) for nan past year, aliases “trailing 12 months” (TTM), this is recovered by dividing a company’s nett profit by their full number of shares of stock. The resulting number helps investors gauge a company’s profitability. The higher nan EPS, nan much investors are consenting to salary for that company’s shares.
  • Ex-dividend date: this is simply a deadline for investors buying shares of banal from a company. If you acquisition a banal connected aliases aft nan ex-dividend date, you won’t person dividends for that period. 
  • Beta: this is a numerical worth utilized to measurement really risky a banal is based connected nan wide market. Betas greater than 1 bespeak a much volatile stock for a group play of time, while nan inverse is existent for betas beneath one.
  • One-year target estimate: this represents an estimate of a stock’s value successful 1 year, based connected an mean recovered by respective analysts. The keyword present is estimate—while it tin beryllium a adjuvant gauge, it’s yet conscionable a forecast and could plaything successful different direction. 

Take a look astatine really these banal floor plan position are applied crossed different types of banal charts below. 

3. Know nan different types of banal charts

If you’ve conscionable begun learning really to publication banal charts, statement charts specified arsenic Alphabet’s supra are akin to swimming successful nan shallow extremity of nan pool—they’re awesome for beginners. That said, location are different types of charts that supply a much in-depth look astatine banal prices and performance. 

Line chart

An illustration of a statement chart is shown to represent nan astir basal type of banal chart.

A statement floor plan is nan astir communal type of banal chart. It uses a elemental statement to correspond a stock’s value movements complete clip and displays nan closing value for each clip period.   

Bar chart

An illustration depicts an illustration of a barroom banal chart, a adjuvant type of floor plan to cognize erstwhile learning really to publication a banal chart.

While a statement floor plan shows conscionable nan closing value for a group play of time, some barroom and candlestick charts besides show nan open, high, and debased successful summation to nan closing price. 

A barroom floor plan uses vertical bars alternatively of lines to correspond a stock’s price, which is often color-coded for illustration nan illustration above. They besides person vertical lines pinch short horizontal lines protruding from each side. 

  • The apical of nan barroom represents nan high, and nan bottommost represents nan low.
  • The short horizontal statement protruding connected nan near indicates nan opening price, and nan 1 connected nan correct shows nan closing price. 

Bar charts let you to gauge banal trends and value volatility pinch somewhat much precision than a statement chart.

Candlestick chart

An illustration shows an illustration of a candlestick banal chart.

A candlestick floor plan presents nan aforesaid information arsenic a barroom chart, but pinch much complexity. In short, candlestick charts show banal value variability from nan marketplace unfastened to close. 

  • The assemblage of nan candle expresses nan unfastened and adjacent prices. 
  • The mini lines supra and beneath nan body, aliases nan wicks, correspond nan precocious and debased prices. 
  • The colors of nan candlestick bespeak if a banal value closed supra aliases beneath its opening level—green intends nan banal accrued successful value, and reddish indicates nan banal decreased successful value. These colors are adjuvant successful getting a fuller position of a stock’s performance. 

All 3 types of banal charts are wide used—the 1 you usage is yet a matter of preference. 

Reading banal charts gets easier pinch practice, and location are a fewer adjuvant points to support successful mind erstwhile analyzing banal trends, different known arsenic “technical analysis.” The extremity end is to not only understand nan patterns you see, but besides further analyse their movements to predict early performance.  

Here are immoderate method study basics to support successful mind erstwhile learning to publication banal charts:

Pay attraction to inclination lines 

Trend lines show nan wide guidance a stock’s value is moving. They’re adjuvant successful assessing value movements because it’s wide assumed that a banal will mostly proceed successful nan aforesaid guidance it’s been going. If a banal floor plan shows an upward-moving inclination line, investors mightiness expect that it will proceed to rise. A banal floor plan pinch a downward-moving inclination statement mightiness bespeak that it will proceed to fall. 

Keep successful mind that inclination lines seldom move successful 1 guidance constantly—swings and fluctuations are normal. Instead, you want to measure nan wide trend. 

Identify support and guidance levels

In summation to inclination lines, investors tin besides tie lines to link highs and lows, known arsenic support and guidance levels. These are nan levels a banal stays wrong complete a play of time, and investors usage them to thief gauge nan correct clip to bargain aliases waste their shares. 

  • A level of support shows a value a banal is improbable to driblet below.
  • A level of guidance shows a value a banal is improbable to spell above. 

If a banal breaks done support aliases resistance, it tin beryllium a awesome to investors to participate aliases exit nan market. If it breaks done resistance, an investor mightiness judge there’s a bully chance nan banal will proceed to rise, truthful surgery guidance tin bespeak a bully clip to enter. If a banal falls past a support area, it whitethorn proceed to fall, which could bespeak a bully clip to exit. 

When analyzing banal charts, retrieve that inclination lines tin look different depending connected nan play of clip you’re viewing connected nan chart. You mightiness spot an upward inclination statement indicating a banal value is rising, but beryllium judge to look astatine a longer clip sky (at slightest a year) to get a fuller image of its performance. A short-term emergence could beryllium an outstanding blip successful what’s really an wide downward trend. 

Understand trading volumes

The mini vertical lines you’ll find astatine nan bottommost of astir banal charts show nan measurement astatine which nan banal is traded. While you shouldn’t guidelines your trading decisions connected measurement alone, it’s adjuvant to consider. Volume will often summation erstwhile awesome news astir a institution is released—good aliases bad. Higher volumes are besides associated pinch much trading activity, indicating you’ll person an easier clip buying aliases trading a stock quickly. 

Learning to publication banal charts mightiness consciousness confusing, but it’s much elemental than you’d deliberation erstwhile you cognize what to look for. Remember to position banal charts comparative to your individual clip horizon. A floor plan for a one-day clip play isn’t each that adjuvant if you’re readying to enactment invested for nan adjacent fewer decades.

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