How to Read Stock Graphs
Each year, thousands of aspiring stock traders come to the market in search of large gains. Some, however, are disappointed when they realize they don't know how to read a stock graph and end up missing trends and losing money. Fortunately, reading stock graphs is easy once you know a few key lessons.
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Instructions
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Reading A Road Map
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Go to a computer and log on to a free charting service such as freestockcharts.com. View a stock chart by clicking on the "New Chart" tab at the top of the screen. A price chart will appear. Input a stock symbol; a price action will be displayed on the graph.
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Observe where the price action begins and ends. If the price starts in the lower left-hand corner and travels toward the upper right-hand corner, it illustrates an upward trend in the stock's price action.
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Spot price action if it begins in the upper left-hand corner of the graph and travels down, toward the lower right-hand corner. That illustrates a downward trend in price action.
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Take note of trend reversals, if the price action, for example, begins in the corner of the left-hand side of the screen but sharply turns toward the same corner from which it began, but on the right side.
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Watch if the price starts out from either corner on the left side of the graph but drifts into the center. If the price drifts, closing near the middle of the right-hand side of graph, the stock is in a trading range and is trend-neutral.
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Tips & Warnings
Using moving averages also can help you determine what type of price action is occurring on the graph through visual reference.
Determining what type of price action is occurring is only the first step. You should not enter into any trade without a sound system and risk control. Always protect your capital by using stops and defining risk.
