Basics of Stock Market - Beginner

How to read stock charts from a beginner's perspective?

It is difficult to understand the stock market chart and pick stocks. You may find it difficult to read a stock market chart if you are new to investing. However, this skill is essential to help you choose a suitable investment for your portfolio. Let's now learn how to read stock market charts.

What is a share market chart?

It is a chart that shows the share market or technical charts. It plays an important role in identifying current trends and trend reversals. It is also crucial in triggering the buy/sell signals. Chart patterns are a distinctive formation that can be used to create a trading signal or indicate future price movements. If you need to see stock prices for a specific time period or for a full year, each point represents the closing price of each stock traded.

How to read and understand technical charts for Indian stocks.

Head and Shoulder

This is a reversal pattern on the chart and signals movement of securities. If it is likely that it will move against the prior trend:

  • Top This is formed at the peak of an upward movement, and indicates that the upward trend may be about to end
  • Bottom This signal is also known to be an inverse signal or a reverse in downtrend.
Daily Bar charts

This chart is the most used by traders. This chart provides important information regarding stocks and prices, e.g.

  • Opening price
  • Closing price
  • It was the highest price it reached in a single day
  • It was the lowest price it reached in a single day

The vertical line is the range, while the horizontal and horizontal lines indicate the opening and closing prices.

Line Chart

It's a chart that records the closing price for each day. It is plotted daily and eventually forms an arc.

Candlestick Chart

It displays price-related data in a different format. It is divided into two sections, each one represented by a single line. The thin line represents the price range, from high to low. The real body is a larger area that allows you to calculate the difference between the closing price and the opening price.

Figure and Point Chart

Stock prices graphicalally represented Although it does not plot stock prices against time, time-based charts do.It plots price against changes in direction by plotting a column that has Xs for price rises and an O column for price falls.

How to read patterns in stock market charts

  • Identify the chart

    Look at the charts to identify the ticker designations or symbols. This is an alphabetic identifier for a company. When searching for company information, it is essential to use the correct symbol.

  • Select a time slot:

    You can do this on a daily basis, weekly or monthly basis. It all depends on how you access the chart. Different timeframes will allow you to identify longer-term trends as well as check for consolidation. Keep an eye on the price of any given day. Look for consolidations in the following days to see if they occur above or below that price.

  • Take a look at the summary key.

    The summary key must be checked as it will provide you with key information in numerical numbers that you can quickly read. You should at minimum see the most recent price, price moving averages, and volume traded in the summary.

  • Keep an eye on the prices

    The chart can be divided into two sections, one upper and one lower. This guides you to the prices. The chart's upper section tracks changes in stock prices over time. Different colors are used to indicate prices. For example, if the stock was closed on a specific day, the marker might be black. The stock's closing price may be indicated in red.

  • watch out for trade volumes.

    The volume of stock traded is located at the bottom. This will allow you to see when the market is moving in a particular direction. It is important to understand the color-coding as it is not fixed. The color represents the difference between the closing price and the closing price the day before.

  • Take a look at the moving averages.

    It's a method of calculating the stock average price over a time period. This is an important tool for stock analysis. These lines are usually indicated in charts by cutting across the chart. This can be helpful in identifying a trend, but it may also lead to lags as they are based on past prices.

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