How Does a Stock Market Chart Work?
Other People Are Reading
-
A stock market chart graphs changes in value over time
-
A stock market chart is a graphical representation of the value of a given stock, or index (group of stocks) over a specified time interval. The Dow Jones Industrial average is the most well-known stock index; the chart is often used as a gauge of the performance of the overall economy. Stock charts are useful because they can quickly convey trends in stock values and how widely the value ranged during the given interval. This allows for a quick assessment of profitability and volatility.
Charts vary greatly in size and scope
-
Another useful aspect of stock charts is how varied they can be in terms of size and scope. One chart might track the hourly trends of a single stock on a given day and be useful to day traders interested in that company, while another might display the performance of the Dow index over several decades, allowing financial planners to project average annual returns over long periods of time. Many websites offer interactive charts that allow stocks to be tracked over any period, which makes researching possible investments much easier than if they were only available in print.
-
Market charts can be deceiving
-
Despite the virtues of stock market charts, they are not the be all and end all of investing. Just because the Dow index drops off during a recession, it does not mean there aren't plenty of stocks out there that are going up during the same period. Also, just because a given stock's chart is taking a nosedive, it doesn't necessarily mean that the company is performing horribly; expectations and market fears play a huge role in the value and volitility of stocks. When the stock of a good company is battered by unfavorable market conditions, it is often a good time to buy rather than sell.
-
