How to Read Stock Charts for Beginners w/ Simple Examples Ep 202

September 20th, 2018

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A Line Chart

This chart right here is a chart of Apple. We have price usually on the right or left axis, and then you have the time axis that's on the bottom.

This chart is a more extended data chart - from 2010 all the way to about mid-2018.

If you take a look at the current price, you line up today's date with the price. That'll give you about 218.28 for the Apple chart.

If you want to go back in time and see well what was a price at the beginning of 2016, you take a look go straight up to 2016, draw that line across and you can see the price was right around about $100 per share.

There are different types of charts out there in the stock market. You can look at data in all sorts of different ways.

We have an Area Chart

Very similar to what you saw before. It's just that things underneath are filled in.

A Candlestick Chart

This is the standard chart that is used in the market or what most traders and investors look at. That is because it gives you more data or signals.

What it does is it tells you in every single one of these bars the high, the low, and the open, and close. The way that it wiggled around throughout that period.

This is actually if we look at this, it is a monthly candle. So every single one of these is a month, tells you the lows, the highs, and where it opened and closed within that month or period.

That way you're not just getting a dot of where the price closed at the end of the month. Instead, you get to see the magnitude of the movement of wiggle room, also within that month. That's what it represents.

Bar Chart

The open, high, low, close chart example - this does the same thing. I find this is a little bit easier for people to digest when they're just getting started. Because if you take a look at this bar here, you can see we opened here. We got down to a certain price level, we got up to a certain price level, and then we closed over here.

It's an input-output model of where you start the movement, the wiggle amount, and then where it exited. That's really what the chart looks like.

Let's take a look at the Candlestick again

I want to share with you an example. This one is McDonald's also a monthly period.

You can see here we've digested from 2012 to about 2015-2016 moving sideways and then price took off. You can see where we went from about a hundred dollars per share, moved a little bit higher and then pulled back a little bit in 2017 and then again continued to power higher into higher prices. As we got into 2017 and 2018, it's just moving a little bit more sideways. We're digesting the move again.

That's how you're looking at chart and reading chart.

You can see periods of digestion, periods of acceleration, or movements higher. and it allows you to spot the price differences across multiple timeframes

Looking at this time frame and Tesla here, we have 2012 to 2013. You can see a digestion period at that time point. The price was right around $30/$40 per share. After 2013, we started to get a ramp-up at prices. Price got into these highs around September/October, and we were at about 180/190 per share.

We then had a little bit of a pullback right before we got into 2014. The price bounced, and we got into higher prices of about $250 per share.

As you look at some of these swing points, which are basically where prices change directions, you can see we're creating a support level or a support line.

In May of 2014, we've hit that support level of about 175. We did it also in 2015 right before May. We've broken beyond that support level early 2016 but then managed to get back above it and then right around late 2016, maybe December time, we've hit it again to hold that support level.

You can see how stock charts are convenient to see - where is that supporting price level. You can also see some resistance levels as well - where are the stocks struggling a little bit at higher prices.

Here with Tesla, you can see again around September time of 2014, and we're hitting higher prices of about 275 where the stock struggled again in 2015 about May/June a timeframe and then also early 2017 as well. It gives you an indication here of how to look at the chart and read the chart.

In simple terms, you got a price on one of the sides, usually the left or right axes there, and then you have time on the bottom side. Then combining these, it allows you to match up the time with the price, and that'll give you an indication of what the price was at a certain period.

If you're looking at bars or candlesticks, it allows you to see how much wiggle room was there for that period. For example, a month or you could do this also on a daily basis.

If we're looking at Amazon on this chart, you can see right now we're on the monthly timeframe, but I could change it to a weekly. Now, you're seeing Bar is a week or on the day, how much wiggle room was happening in the day period.

Author: Jorge Diaz

I'm Sasha, an educational entrepreneur and a stock trader. In addition to running my own online businesses, I also enjoy trading stocks and helping the individual investor understand the stock market. Let me share with you some techniques & concepts that I used over the last 10+ years to give you that edge in the market. Learn More

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