In this article, you will learn how to read a stock market chart, the absolutely essential step to start building your own analyses of whatever asset you want to analyze (stocks, indices, commodities, forex).
We will brief you on the 3 ways to read trading charts:
Line Chart
This is the simplest representation. In this representation, each point corresponds to the closing price. The points placed end to end then form lines which themselves form curves.
Despite its simplicity, this type of chart is rarely used by traders. Indeed, we will see by studying the other types of graphs that this one is sorely lacking in information to carry out a relevant analysis (example: GAP, low and high points of the period, etc.)
It is still necessary to know this type of graph is often used by the media or certain independent platforms.
Bar Charts
Here we have rods made up of horizontal and small vertical lines. We also see that each stick corresponds to a period (here in days).
On the other hand, thanks to these bar charts, we have much more information about the period under consideration. Indeed, these bars allow us to know the opening and closing prices and the lowest and the highest reached in the period. We, therefore, have better visibility over the entire amplitude of the period.
A rising bar (the closing price is higher than the opening price) is often colored blue or black. Conversely, a falling bar is characterized by a red or black colored bar.
Traders use this graphical representation more because, as you may have noticed, it is much more complete.
Candlesticks Chart (also called Japanese Candlesticks Chart)
Having already written an article on this subject, we suggest you refer to it. In particular, we explain how to understand the candlesticks chart easily and make better trading decisions. Learn how to read candlestick charts.
Meanwhile, if you wish to test your knowledge of the trading charts before investing your hard-earned money, we suggest you open a demo account. ATFX offers all the major financial products on a solid trading platform to practice different strategies while still learning from a guide or the free training materials ATFX provides. So, get your demo trading account for free now !
