subject: Stock Charts For Stock Market Beginners [print this page] Whoever is interested in investing in the stock market should learn early that the most important tool needed to analyze a prospective investment is a company's stock chart. A stock chart is a sequence of prices, plotted over a specific time frame, that are used to analyze a security's performance over that designated period of time.
The information found in a stock chart succinctly comes in a form that allows individuals to properly assess a stock and establish a trading plan. These performance charts reveal important daily stock levels that can be used to analyze stocks, options, indexes and other financial instruments. These stock charts must be mastered by any beginner who plans to take their trading to the next level.
Technical analysis indicators are important in the process of determining which stock to buy or sell. You can't simply review the weekly market news or check out a market carpet or listen to a television commentator make their market picks. Technical analysis indicators are a necessity for any serious investor who wants to see a return on their investment. Charting is a skill that must be practiced and mastered before it can be optimally used.
Technical analysis is embraced by those who believe a stock's historical prices and volume can help determine the next move. The process begins by looking at the stock's performance charts, which offer a historical view of the prices at which the stock has sold. The examination process continues by viewing the candlestick charts, the most popular form of seeing the information. Line charts and bar charts are also available, but are considered either less information or harder to analyze than candlestick charts, which offer a way to absorb the entire day's trading in one glance. Candlesticks, invented hundreds of years ago in Japan, easily show the day's open and closing prices, as well as the high and low of the day.
Many traders like to superimpose a 10-day exponential moving average or a 20-day moving average on their stock's price chart to reveal deeper interpretation. Savvy traders will often use a trading platform that will send them stock alerts, warning them when an underlying has reached an important price point. Many traders will use stock alerts to inform them when a stock hits a support or resistance level.
Some investors prefer to use fundamental analysis when examining at a stock's price chart. Fundamental analysis is quite different from technical analysis because it looks at the internals of a company, such things as how it is managed, how it compares with others in the same sector, how it compares to an index that contains similar stocks, and the value of its company brand. Those who choose to use fundamental analysis look at the annual report, the balance sheet, the income statement and cash flow statement before becoming involved. On the other hand, those factors are unnecessary to a technical analyst.
Charts are available at most financial sites and should be reviewed before making any decision about whether to purchase a stock, option or index. Most individuals, after learning to use the information available in a stock chart, will continue to do so. Chart should become an important part of every investor's routine.
