by Paul Oranika

Created on: January 13, 2009   Last Updated: February 12, 2012

How to Read Stock Market Charts

Stock market charts tell a story, it is a story that anyone interested in trading and making money from the stock markets needs to understand. It tells you a story and life history of companies, from their birth. Through charts, good and knowledgeable investors have been able to profit from the markets, regardless of the market's direction. The good news is that reading and understanding stock charts could be learned as with any other aspect of stock trading. The difference between expert traders and the novis resonates from the ability of the former to understand what may happen next in a stock and positioning themselves to take advantage of it, and the later who has no clue about what may happen next in a particular stock. There are many indicators and signals, which are illustrated in charts, which send a buy or sell signal for traders. These signals are generally referred to as technical analysis; I will discuss the most important and common of these signals to help you understand why it is important to know how to read stock charts.

Stock Bars

Through an understanding of stock charts, the informed stock traders are able to take advantage of stock trends and understand the stage a particular stock is in, whether it is about to gain value, decline or move in sideways formation. When you look at a chart and you see an ascending line of the bar charts where each bar is higher than the previous one, it marks a healthy stock, advancing in price. The other side is when you see the stock bars in a descending formation where each stock bar is lower than the previous, it warns you of weakness in the stock's fundamentals, signifying selling pressure on the stock price. Stocks move up or down depending on how well the company is doing and such information is shown in the stock-trading price.

Volume

The bar lines also tells you how much heavy the volume of stock is by way of the total length of each bar, as well as the stock's total trading volume for the day, week, month, or year. This information is critical in understanding the liquidity of each stock, liquidity means how slow or fast the stock may be purchased or sold. All these information are stored on the stock charts.

Trend Lines

Stock charts show you the trend lines, which could be connected to illustrate the direction, which the stock may be heading. Trend lines are very critical is knowing where to buy or sell a stock, this often means losses or gains as the case may be.

Moving

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