Learn How to read stock charts? help you analyze stock charts and understand the issues that the stock is trying to inform you through indicators, figures,.. At the same time, learning how to read technical indicators of the stock also helps you Forecasting stock price movements through the study of historical market data. In this article, Vninvestment will guide you on how to read stock charts correctly and simply for newbies.
Types of stock charts
1. Line Chart (line format)
Line Chart is also known as a line chart because it only shows a single up and down line representing the closing price in the trading time frame. Some investors believe that the closing price on the Line Chart is the only information that users need to grasp after each trading session because the chart shows where the price has gone very clearly. However, because a line chart has no other information, it is often used only to observe long-term goals.
The way to read a line chart is to read it from left to right. Information of closing prices is connected to form a signal band.
2. Bar Chart (HLC/OHLC)
A bar chart is a vertical line that shows the trading price range during the session including: open - close, high and low. Bar charts are often preferred by pure investors because the information only includes prices and numbers, so investors can find price patterns more easily.
How to read a stock bar chart is very simple, we just need to look at that line, if the price goes up the line will be green and vice versa if the price goes down the line will be red in a trading time frame certain.
Two horizontal lines from the price range help to show the opening and closing prices. The horizontal line to the left is the opening price and vice versa is the closing price.
3. Japanese candlestick chart
Japanese Candlestick Chart is one of the widely used charts around the world because it partly reflects the emotions behind price movements. Help investors get more information about price behavior in the market. Japanese candlestick chart also includes full information such as: opening price, closing price, highest price and lowest price.
The correct way to read the Japanese candlestick chart is to identify the candle body and the shadow
- The body of the candle: shows the volatility between the opening and closing prices
- Slender candle shadow: shows the range of price movements during the session. It also includes the highest and lowest prices in the trading timeframe.
10 basic information on stock charts
- Number 1: trading stock name and price movement in 1 day
- Number 2: Trading timeframes for 1 day
- Number 3: Types of stock charts
- Number 4: Stock technical indicators
- Number 5: One of the stock technical indicators
- Number 6: Applicable trading time frame and stock ticker on the chart
- Number 7: Open - close price, low and high price in the trading time frame
- Number 8: Show the timeline from the past to the present (from left to right)
- Number 9: The prices with the red line are the current price of the stock.
- Number 10: The displayed stock trading chart depends on the type of chart you choose.
A guide to reading stock charts properly
1. Interested in trading volume:
Trading volume shows the market's interest in the stock
- Price is rising and volume is high: Indicates the stock price will continue to rise
- The price is falling and the volume is low : indicating that the price may rise again
- The price is falling and the volume is high: Shows that the price may continue to fall
- Price is rising and trading volume is low: It shows that investors are no longer confident in a continuing uptrend.
2. Trend and momentum indicator analysis
- Trend indicator: Used to determine whether the overall trend of a stock's price is up or down. Moving averages help to see resistance and support on price charts and price trends.
- Momentum indicator: helps to gauge the strength of price movement, thereby finding entry points like the MACD or RSI.
3. Identify support and resistance levels
Stock charts are very helpful in identifying support and resistance levels.
- A support level is a price level that is trending down and is often prevented from reversing to an uptrend.
- Resistance is the opposite so it is trending up and will often fail when trying to move the price higher -> reverse to bearish.
How to read stock charts This will help you capture and analyze what the numbers are trying to tell you. Therefore, before you start participating in the stock market, you should learn how to read and analyze charts to be able to identify and make the best decisions at each moment.