How to Use Stock Market Charting Software

Basic Chart

Some investors look at the fundamentals of a company and some rely solely on a chart to gauge when to buy in or when to go short. There is some really cool software available that you can use if you want to take advantage of stock charts to make investment decisions. Let's take a look at how typical charting software works.

Things You'll Need

• A computer with internet access

Instructions

It's all about the lines.

1. 

   Learn to read charts. Since this article is about how to use stock market charting software, it is assumed that the reader already knows how to read the charts themselves otherwise explaining the software will be of no use. There are many publications already in existence on how to read charts.

2. 

   Access charts or charting software. This can be done via the internet by going to such sites as Bigcharts.com, Stockcharts.com or many other charting sites. These sites provide charts that you can manipulate to the type of views and parameters that you want to see. In addition, all the major brokerage firms provide charting software through their websites. They typically have down loadable trading platform software that becomes a program on your computer. These trading platforms also include charting software. How sophisticated the software is usually depends on what level of investor you are. Investors who trade over a certain amount times per month are granted access to more sophisticated trading platforms than others.

3. 

   Customize the Chart. There are many tabs and drop down menus associated with the chart. These functions look different depending on what the source is for your charts. From one brokerage firm to another, they will have a different appearance. However, the options to chose from are pretty much the same.

4. 

   Start with the basics. Enter the symbol of the stock you want to chart in the symbol window then pick a time frame. The tab may be labeled "period." A drop down menu will have choices like "Daily" "Weekly" "hourly" etc. Choose the time frame that you want to see.

5. Find your range. Look for a tab labeled "range." Here you will find choices of Years, Months, Weeks, Etc depending on if you want to see a short or long term history of the stock.

6. Pick your type. The "Type" tab will change the display of the chart lines to bars or candlesticks, Etc. There are many variations to choose from.

7. 

   Color it Purple. Maybe Blue would be better? The Color tab lets you manipulate the colors of the background, chart lines, overlays and much more. Experimenting with this function will get you to a color scheme that makes it easy to visually separate all the elements.

8. Work over the Overlays. You can add moving averages, bollinger bands, keltner channels and the like in the overlays section. These will all key nicely over your chart by selecting the ones you want from the drop down windows.

9. 

   Time to set up some indicators. These tabs will let you choose Volume, RSI, MACD and more when you want to add elements that will give a hint as to future direction of the stock. They will appear in a box above or below the main chart itself.

10. Get live streaming quotes. If you trade often, your broker will likely provide real time streaming quotes through your charting software. Otherwise, some of the stock chart web sites will give access to live quotes for an additional fee. Live quotes always give you an edge on the market. There's nothing like seeing price changes as they happen to give you a better idea of the stock's momentum and direction.

11. Go with the trend. Usually in the top bar or side bar there is a drawing tool icon. Click on it and your mouse will turn to an arrow or a cross hair. You can now pick a start position on your chart then click, hold and drag across to your desired end position to create a trend line. You can draw a line to any place on the chart you want.

12. 

    Make a decision. Now that you know the basics of using your stock market charting software, you can use that information to make your next move as to whether you want to buy, sell, hold or stay in cash.

Tips & Warnings

• Keep it simple. No need to use all the options if they don't help in your decision making.

• Stock trading is risky. The chart is a very dependable tool when used correctly, but unforeseen market forces can defy what the chart tells you.