Reading a Stock Chart

If you’ve ever
watched financial news or looked at the
price of a stock, chances are you’ve
read a stock chart. A stock chart is a
graph that displays the price of an investment
over a period of time. In this video, we’ll
discuss some chart basics, view three common
types, and show you how each displays an
investment’s performance. Finally, we’ll introduce a few
basics of technical analysis, which is an investment
strategy that analyzes charts to help
forecast future price movements. Let’s start with charts. The main purpose of
any chart is to display the current price
of an investment and how its price has
changed over time. One of the most common
chart types is a line chart. A line chart is fairly simple. Time is represented along
the horizontal axis. This time frame can be adjusted
to show any period you want, from minutes to days to years. And price is represented
along the vertical axis. Points are added to the chart to
display the investment’s price at the end of a trading period. On a daily chart, this
would be the closing price at the end of a trading day. On an hourly chart,
this would be the price at the end
of the hour, and so on. The points are then
connected with a line which provides an easy way
to visualize price changes. Often, another chart
may be displayed just below the line chart. This chart displays
the security’s volume, which is the total number
of shares bought and sold during each time interval. Volume is a way to
measure trading activity. The higher the volume, the
more buying and selling there was during
that time period. Finally, let’s examine
the information covered at the top of the chart. This section includes the
company name, the stock exchange on which the
security is traded, and the current date. This area also provides
additional details on price, such as the time period’s
opening and high prices. The amount of
information detailed at the top of the chart
will vary depending on the chart provider. Here’s some information you
might find on a daily chart. The opening price is
usually labeled open, or it might be abbreviated
as O. This is the stock’s price at the market’s open. The highest price
the security reached is labeled high or H. The lowest
price the security traded at is labeled low or L. The
difference between the high and the low is the range,
which is labeled range or R. The security’s closing
price is labeled close or C. The closing
price typically the value shown
in the line graph. Then we have volume or V. This
calculates how many shares or contracts were traded. Finally, we have the change. This shows both the dollar
amount and percentage change from yesterday’s closing price
to today’s closing price. You can also view
all this information, like the opening and closing
prices, on a bar chart. This chart uses a vertical
bar instead of a line to represent price. This bar provides additional
details about price movement during a single trading period. The left tick is
the opening price. The right tick is
the closing price. The top of the bar is
the highest price traded. The bottom is the lowest. Some investors might prefer a
bar chart over a line chart, because they believe
it better reflects market sentiment and the
price action of a security. In other words, you can
see if other investors are bullish or bearish on a stock. You can also see
this information on a candlestick chart. Candlestick charts feature the
same components of a bar chart, like the opening
price, closing price, and the day’s high and low. The lines above and below
the body of the candlestick can be referred to as wicks. If a security closes
higher than it opened, the candlestick
is empty or white. But if the security closes that
a lower price than it opened, the candlestick is
filled or black. This use of color helps
investors quickly identify the security’s performance. Some investors might use a
candlestick chart instead of a bar chart,
because they think it’s easier to identify
market sentiment and patterns. These patterns attempt to
predict how the market will move in the future. For example, one
particular candle shape may forecast that the market
is due for an upswing. This is just one example
of technical analysis. There are a variety
of techniques that can be used to closely
analyze trends, price patterns, and volume movements. All three chart types
are widely used. Generally, the type
an investor uses is often a matter of preference. Next time you pull up a chart,
try using a different chart type, and see what you prefer. [MUSIC PLAYING]

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