In today’s post, I’m going to share with you how to read a stock chart.
We’re going to show you the basics, and then we’re going to take a look at the screen. I’ll simplify it make it easy, and that way, you don’t have to be overwhelmed on how to figure out what the chart is doing.
How to Read Stock Charts?
You might have seen a ton of different stock charts already, but you’re confused about how to read them.
Let’s say here we have a chart, and this could be MCD. That is a ticker symbol – it means McDonald’s.
Every stock has a ticker symbol:
- Nike – NKE
- Procter and Gamble – P&G
You’ll be familiar with the different ticker symbols as you do trades and evaluate and look at stocks.
Just like in grade school, charts are no different when it comes to the stock market, with a few exceptions. Here’s our basic chart. The way that it works is here’s your vertical axis, and here’s the horizontal axis.
Here’s your zero line. This is your timeline. Here you have years. It could be 2016, 2017, 2018 – it depends. Sometimes these could be months and depends how zoomed in you are.
Some people take a look at the chart, and they zoom in to a specific area. But ultimately, this time can be stretched. You can look at a zoomed-in version or a big view, which is like by years. You could do it for months.
You could do something like January, February, March, April, and so on, depending on the timeframe you’re at.
And then the left side is the price. The vertical side is the stock price. This could be $25, $35, $45, $55, $65 a share and so on.
This could be stretched depending on how explosive the stock is. A lot of times, you’ll see these stock prices on the opposite side. You’ll see it here on the right side.
You’ll see it backward, and the reason for that is because the way stocks move is they move to the right. With time as time moves forward, this chart is like never-ending.
Let’s say a stock opened up at $25 a share in January 2016. It continues to move, wiggle, go down, go up, you have like this stock chart that continues to move.
And it’s a lot easier to see the price if the prices are over here. The prices are on this side a lot of times. And if you want to figure out what was the price in March at this time, you go straight up where’s the stock, where’s the price – $65 a share. Currently, right now, that’s over here – it might be $62.
That’s the simple way to look at a stock chart. I want to show you on screen what this looks like.
Taking a look at the screen
Here are more advanced trading panel and platform. Overall most of these trading platforms are very similar and the same. And if you check out our website at TradersFly.com and check out the resources, you could get some discounts to some of these technical analysis and trading tools.
Like TC 2000 by Worden. This is the one that I’m using right now. There’s also TD Ameritrade, so if you look at charts, you can look at the SPX.
There you can see:
- a 5-minute chart
- a 30-minute chart
You can continue to switch these different timeframes.
Ultimately what you’re doing here, it’s in the same way. If you look at this bottom axes, you can see January, February, March – this is 2019.
If I go to the left, that’s 2018. And it continues to move forward. Notice the prices are on this right side.
That way quickly and easily, you could spot where’s the current price. It’s right there. It’s right next to the price because that ticker continues to move to the right.
Take a look at NIKE
I can now switch these views. You may think these look completely different as I’m jumping around. But all I’m doing is switching between a monthly timeframe, which is these bars. Each bar represents a month.
You could see now this is 2008, 2009, 2010, 2011, all the way up to 2019. You can see how that stock did over the long haul. I could switch it to a weekly. Now each bar represents a week. And now you only see 2017, 2018, 2019, and we’re getting into 2020.
It’s a zoomed-in view. You could see here’s the monthly. Here’s this down pullback on those monthly bars. Let’s look at the weekly. Here’s each bar represents a week, but here’s that same pullback.
It’s just more bars.
I could do a 3-day — 2-day today or even a daily. Every bar is now going to be a day here. Now you can see here’s our downward slope recently over the last few days we’ve had this downward slope.
You can see in this view we have August, September, October. It’s only a couple of months. It’s just you’re looking at a recent timeframe here. And I can zoom in even further. Here’s a two hour. You can see here’s that downward slope that we’ve still had, but every bar now is a two-hour.
I could go even to an hourly. Every bar is an hour. Also, you can look at 30, 15, and 10 minutes. You could see it’s still there, but there’s just much more data. You could zoom into ticks every second. But there’s just too much data. You can’t make trading decisions every second.
That’s why a lot of people start with a daily chart. That’s like every bar is a day, two days a week. You could do a monthly if you’re a longer-term investor. And now it’s just much cleaner of a chart.
You might be confused when you’re looking at these bars because instead of this line graph that I show, you see something like these bars. And that’s a little bit more advanced. All this does is it has more data in for the chart.
This was high. This is low. And what’s going on is depending on what color this is the close could be either here or up in this area. Some people like looking at a little open high and low and close bars like this.
That’s because then you could say the stock opened at this, wiggled around and closed right here. All that data is packed into a single line, and that’s what it gives you.
This is a bar view. Let’s go to daily. You could see here (the bars) they’re a bit easier sometimes to see for beginners even though they’re a little bit tougher to see visually with your eyes.
Let’s take this bar, for example, right here. All it says is the stock opened at this price, wiggled around throughout the day, and closed right there.
The same thing with this one. It open here, wiggled around, and closed right here. You might be wondering why are these green if the stock price closed lower. Well, it just depends on how you have the chart highlighted, whether it’s based on the previous day or based on the day movement. You can change that in the settings.
This one you can see opened here wiggled around closed. And in this one it is red, so it closed over here. I think it’s a little easier for beginners to see. And this is what I usually use myself, but as far as teaching goes, just because it’s a little more readable, I will typically use more like a candlestick thing. That’s because it’s a little bit easier to spot.
Anyways, you could add in other indicators here. Here’s like technical analysis indicators, Bollinger Bands, ADX, RSI – those are the things on the bottom. It comes down to your personal preference for what you’re using and how you’re trading.
Sometimes you could split views. Here’s a three-view chart time frame, but it just comes down to personal preference what you like and what makes sense for you.
I hope you found it helpful and insightful about taking a look at these charts. Don’t forget to check out our TradersFly website.
There’s a lot of great getting started things if you’re brand new to trading stocks online.
Also, we have some other great memberships available as well if you’re interested in swing charting, technical analysis, or even if you’re getting into some options trading as well.