A stock chart is a chart, which represents the trends of stocks in a systematic way. The bottom of the chart (X-axis) represents the time line denominated in days, months or years. The vertical axis (Y-axis) shows the trading price value. The future performance of a stock can also be evaluated from a well represented chart. The performance of a stock over time can be known from a stock chart. Usually, stocks show a down trend.
The stock cycle revealed in a stock chart has a self-repeating four main stages. The stock enters an upward trend in its first stage. In its second stage, it is traded again with momentum traders buying that stock. In the third stage, the stock reaches its crescendo and in the fourth stage, it begins to repeat its downward trend again.
Though stock charts are of various types, there are some basic charting skills common to all of them. These charts are instrumental in bettering trading outcome. Resistance levels of a stock can be known best from a stock chart.The price levels through which a stock passes with difficulty is known as the resistance level.
The upper resistance is the ceiling while the bottom resistance is the floor. In the floor situation, the buyers enter the market with the intension of stabilizing the price, while in the ceiling situation the sellers enter the market with the aim of driving down the stock price.
With each test, the resistance level increases in strength. The prices at which the stock moves sideways on a stock chart are to be spotted in order find the resistance level.
The number of shares traded in a day or the trading volume can also be known from a stock chart. This volume is revealed along the bottom of a stock chart. When a stock on high volume is traded high then this trend continues. Trading activities that are higher than normal on a stock chart show a positive sign.
The stock chart gap can also be known from chart of stock prices. This space is revealed as a gap on the chart where the stock “jumps”. On the basis of this information, a stock chart has other alternatives too, but this does not reduce the importance of a stock chart.
Last Updated on : 26th August 2013