How To Read Stock ChartsBy learning how to read stock charts you’ll come to understand the basic principles that make up stock chart analysis.You don’t need to learn dozens of chart patterns or be familiar with technical indicators. With a good understanding of the basics (and lots of practice) you’ll be able to read stock charts with a high level of proficiency. The essential ideasAn effective stock chart analysis method can be developed using the foundation stock chart concepts of:
TrendsWe make money in the stock market by purchasing stocks that are rising in price. The ability to spot good trends is a key skill that a trader needs to develop. To learn more about stock trends read Stock Trend Analysis. VolumeThe higher a stock’s trading volume, the more interest the market has in it. A stock trading on high volume is likely to be in demand and that’s what we’re interested in.In an uptrend, we want to see volume increase as the price moves up, and decline as the stock moves down – this is normal behavior. It takes time and practice to learn how to read stock chart volume. You might find it difficult at first so be patient. Support and resistanceSupport and resistance levels can be used to determine which way a stock is likely to move. For instance, if a stock breaks out above a resistance level convincingly, then the stock is likely to go higher and form an uptrend.If a stock breaks down below a support level, then the stock is likely to go lower and form a downtrend.  To learn more about support and resistance levels see Support and Resistance Levels – How to Use Them Conclusion We want to see stock prices rising on higher than average volume. This shows that the stock is being appreciated by the market. We also need to pay attention to resistance levels as this gives us a clue to where the price may potentially stall on the way up. You can’t learn stock chart analysis in a day. Practice is required if you want to become proficient. "Knowing" how to do it is one thing, but regular, continued practice will yield the results you’re after – the ability to pick winning stocks on a high-probability basis. To learn more read Stock Chart Analysis
Return from How To Read Stock Chartsto Technical Analysis Fundamentals Return from How To Read Stock Charts to Home page |