How to read stock charts on digital signage? Charts are the stock trader’s primary tool of trade. If you are comparing the prices of stocks such as NASDAQ, or Apple (AAPL), a chart is your best weapon. Traders use charts to determine stock price action and help them make informed and intelligent trades.

Therefore, before you trade stocks in real-time, you need to familiarize yourself with charts. To understand how to read stock charts, you should first identify what’s on a stock chart and the different types of charts and how it can boost your internal business communication.

What Is on a Stock Chart?

A stock chart features price, trading volume, and technical indicators. Here is a breakdown of these elements.

1. Price

This is an essential component of every chart. The Y-axis, the vertical line on the chart, represents the stock price. On the other hand, the X-axis, or the horizontal line on the chart, represents time. On a line chart, price features at points where the stock is traded during a specific period. With the bar and candlestick chart, the open, close, high, and low are the prices of a stock for a specific period.

2. Trading Volume

The trading volume shows the number of shares traded during a specific period. It helps with stock analysis to determine the price levels that prompt traders to enter and exit positions. Volume features in vertical bars at the bottom of a chart. For example, a volume bar below a five-minute candle indicates the number of shares traded within five minutes.

3. Technical Indicators

Traders of Forex currencies, ETFs, stocks, and other commodities often add technical indicators to their charts. These traders use trading strategies that rely on indicators and also refer to stock information from sites like Yahoo finance to enter or exit trades.

The indicators show trends, price momentum, among other things. The most common technical indicators are a volume-weighted average price indicator, a relative strength indicator, and a moving average.

·       Volume Weighted Average Price Indicator

A volume-weighted average price indicator is a line that represents the price of a high volume of stock. The indicator helps you determine whether those who entered positions are in a profit or loss. Moreover, this tells you whether the traders will exit their trades, which would push the price down. The volume-weighted average price indicator enables you to remain on the right side of the market momentum.

·       RSI Indicator

Another important indicator that traders use to assess the past performance or price changes of a stock is the RSI indicator. With this indicator, a trader can measure the degree of recent fluctuations in price and determine whether a stock is oversold or overbought.

The RSI is an oscillator graph that has readings between 0 and 100. So, if an RSI reading is below 30, the stock went for a diminished value or was oversold. Yet, if the reading is over 70, the stock went for an exaggerated value or was over-bought. This information helps traders determine future price movement.

·       Moving Average

Traders find it hard to predict price trends in the stock markets. This is the reason they use a moving average. Actually, the indicator identifies up-trends and down-trends. A moving average also determines upward and downward volatility and support and resistance levels.

When the stock is in an up-trend, the MA line rises and the opposite if it’s in a down-trend. On the other hand, the short-term MA line crosses above the long-term MA line when there is upward momentum. The opposite happens when there is downward momentum.

Types of Stock Charts

Charts help Wall Street traders identify patterns. They enable intraday traders to predict how the stock price will move. Traders also identify different stock charts through ticker symbols on Google Finance and Yahoo Finance websites. These sites will reflect the dividend yield of various commodities. Therefore, it’s essential to familiarize yourself with the different stock charts.

1. Line Charts

This chart shows the price in a line at any given point during a trading day. Therefore, you will see the closing prices in a daily chart during different time periods. Typically, line charts show the closing price. Each price point connects to adjacent prices with lines.

2. Figure Charts

These charts are only concerned with the price of a stock. The chart uses an “X” to show an increase in price and an “O” to show a decrease in price.

3. Bar Charts

These are more complex than line charts. However, bar charts show the high and low prices of a specific time period. The vertical line indicates the highest and lowest prices. A horizontal flag runs to the left and right at opening and closing prices.

4. Candlestick Charts

Candlestick charts provide more information than bar charts. The candlestick color shows whether a stock’s price closed up or down during a specific period. Hence, the most popular colors are green and red or white and black.

White and green means the market was bullish and closed up, whereas black or red means the market was bearish and closed down. Traders buy stocks when the market is bullish and sell when it’s bearish.

What’s more, the candlestick’s body shows the stock price range between the open and close price. The two wicks at the top and bottom of the candles show the upper and lower levels of the stock’s price range.

Above all, many traders rely on candlestick chart patterns to make trading decisions. Some also add trend lines and other indicators on these charts to confirm their entries or exits.

In Conclusion

If you are venturing into stock trading, you should know how to read stock charts. Not only does reading charts help beginners determine share price, but it also enables them to spot breakouts and make wise moves. The best investment decisions rely on knowing the stocks you are trading and how to read stock charts.