This is an important parameter of stock trading “How to Read the Stock Chart”. Further, How to Analyse Stock Chart is a high volume question. Each and every trader want to know this approach. We will discuss all the related points in simple and easy language.
The chart analysis is the key indicator of a stock. Moreover, you can know almost the technical analysis following the chart. Therefore, the best approach to how to read the stock chart is explained in this article. All the analysis in this article is only for educational purpose and not recommended for any particular stock.
The chart of a stock reflects all the analytics about the particular stock. A chart consists of the price movement of the stock. All fundamental and technical analytics are also involved in the price of a stock. In other words, the chart is the key to all the analytics.
FAQ How to read the stock chart
How to read the Stock Chart
Many traders ask that how to analyse a stock chart and what is the starting point for the chart reading. Firstly, I would like to inform you that this is a step to step process. Further, the first process for how to read the stock chart is to identify the trend.
Identifying the chart trend is the first step of how to analyse a stock chart. Further, this is an image to understand that how to analyse a stock chart. This is an up-trend chart, you may identify the up-trend in a chart.
This is very simple to know the trend of a stock chart. Kindly look at the above image, this is an up-trend chart. Further, there are three average lines along with the chart. The average line and other indicators are also a part of the chart analysis. However, this is the next step of this chart analysis.
This is very easy to identify the up-trend of any stock chart. Further, the chart goes upside like stairs and makes the higher top and higher bottom. You may buy stocks or make the position in the up-trend. It is profitable for a trader as the prices are going to the upside in the up-trend chart. It is very profitable for a buyer.
Down-Trend Chart: How to read the stock chart
Further, this is a down-trend chart. The prices are going to downside like down-stairs and lower top and lower bottom.
Therefore, the down-trend chart is very harmful to a buyer. However, this may profitable for short selling trading. Short-selling trading in derivatives trading and advanced training. Therefore, sort selling trading is not recommended to beginners.
No-Trend or Side-Ways Chart
This is the image of a side-ways chart. Further, the prices are restricted in a range or it is also called a range bounded chart. This is a no-profit no-loss chart. Traders are advised to forget this stock because there is nothing to trade.
There are a total of three terms of the trend. The first one is an up-trend chart, the second one is a down-trend chart and the last one is a side-ways chart. Each and every stock follow one of the three trends at a time. In other words, trend identifying is the first step of how to read the stock chart.
After identifying the chart trend you have to act accordingly. Further, you must follow the chart trend to make a profit. Moreover, the best strategy to follow the chart trend is also mentioned above. This is a simple way to identify the trend of a chart.
Strength of the Trend
Basically, it is very important to know the strength of the trend. Further, this will identify easily following the chart direction. The strength of the direction denotes the strength of the trend. In other words, you may identify it from the value of the up and down angle.
Further, the strength of a trend may cause a direct effect on the profit. Similarly, the higher up-trend the higher profit for a buyer. On the other hand, the higher down-trend the higher profit for a seller.
Volatility between the trend
Generally, this is also an important term called volatility between the trend. As you know that the chart movement is not like a straight line. It has several ups and downs during the movement.
The volatility is nothing but ups and downs during the movement of a chart. You may categorise it as high, medium and low volatility. Further, you may identify it from the above images. A strengthen trend with low volatility may lead you to profit.
Now, I believe that you may identify the trend and volatility of a chart. Further, these are the initial factors of how to read the stock chart. You may also understand how to analyse a stock chart. However, the chart reading has various topics and terms. We will discuss it one by one for a better understanding.
The momentum of the trend
Generally, the movement of the trend is similar to the strength of the trend. This is also a term of the stock market. Further, this is a form of the movement of the prices. You may categorise it as good movement and low movement.
Similarly, a good movement indicates the high price movement in a stock. It also has the potential for making a profit. Traders can identify it easily while understanding a chart. Chart trend, strength, volatility and movement are nothing but the terms of the stock market.
In conclusion, an up-trend chart with high strength/movement with low volatility is profitable to the buyer. Similarly, a down-trend chart with high strength/movement with low volatility is profitable for a short seller. Further, the side-ways charts are no trending chart.
How to Analyse a stock
This is also a big task how to analyse a stock. Further, each and every stock has its own character. Moreover, we have to identify its character before choosing or buying a stock. Generally, there are two types of characters of the stocks.
Firstly, the high volatility stock means a bad character stock. The most reason for the bad character is that the high volatility may hit your stop loss many times. Ultimately, the stock is in an uptrend but you take the loss due to hit stop loss.
Secondly, the low volatility stock means a good character stock. Generally, the low volatility stocks don’t hit the stop loss and you can make a profit easily. The low volatility stocks are good to make a profit.
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