How to Chart Stocks
Charting stocks has become far easier in the technology age. Computers do all the necessary work that human hands had to do before the advent of computers. In the early 1900s, individuals would, by hand, trace out the price movements of various stocks. Today, websites such as CNBC.com and Yahoo! Finance do this free of charge. Now, the art is no longer how to chart a stock, but how to interpret a stock chart.
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Instructions
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1
Identify the opening price, closing price and the high and low price of a given stock each day.
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Calculate the average closing price for the stock you are tracking over a given time period as a means of determining its general price trend. Most software will calculate this for you; it is known as the moving average.
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Use weekly charts. Weekly charts are often more reliable than daily charts since they contain a greater amount of price data.
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Look for reversals. One of the most telling features of a chart is when it shows a stock that opens at a new high and closes at a new low, or vice-versa. In this event, the direction in which the stock closes likely reflects the future direction of the stock.
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Heed the gap. When a stock opens higher than it closed the previous day (this is known as a gap higher) and continues higher for the remainder of the day, the chart has is reflecting a bullish indicator. This idea works the same way if a stock gaps lower. Gaps are important technical indicators and should be followed closely.
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Tips & Warnings
The weekly closing price is more important than the daily closing price.
Don't pay just for charting software. It is available for free from many websites.
