Method 1 of 2:Reading a Graphical Stock Chart
1. Identify the chart.
The first thing to do is identify the chart that you are looking at. Look to the top left hand corner of the chart and you will see the ticker designation, or symbol. This is a short alphabetic identifier, generally three or four letters long. For example, the symbol for Ford Motor Company is "F" while the symbol for Forward Industries is "FORD". It is important to have the correct symbol when looking up information on a company.
You can search for tickers by company online.
There may also be a time and date for the chart.
If you are using charts online they can be updated frequently or even in real-time.
2. Choose a time window.
This can be daily, weekly, monthly, or yearly. Depending on where you are accessing the chart, you may be able to choose between these different views. Looking at these different timescales will help you identify longer and shorter-term trends, and see when the stock has formed "consolidations." Consolidations are periods of stable prices (very little movement). Remember that the horizontal X-axis always shows the time period (left to right).
Note the price on any given day and look for consolidations in the days that follow. Note whether they form above or below the price in question. There could be consolidations both above and below.
When they are above, the consolidations signify resistance to the price moving up. When they are below they show resistance to downward movement and are referred to as "support". Stock traders often use support levels as opportunity to purchase a stock anticipating a rebound in price. Traders use resistance levels as indication that the stock price will decrease.
3. Note the summary key.
Just below the stock designation in the top left hand corner of the chart, you should see the summary key. This will give you the key information from the chart in numerical values that you can read quickly. The amount of information included in the summary key will vary depending on the chart.
It should at least give you the latest price, and the price moving averages.
It may also tell you about the volumes traded.
4. Track the prices.
The chart itself will be divided into two sections, the larger upper section and the smaller lower section. The upper part of the chart tracks the changes in the price the stock has been traded at over the period covered by the chart. This may be shown with a line, bars, or with markers known as “candlesticks.” The prices are shown along the vertical Y-axis.
Often these markers will be colour-coded. For example, if the stock closed up on a particular day, the marker may be black.
If the stock closed down it may be marked in red.
5. Note the volume traded.
In the bottom section of the chart, you will see the information on the volume of stocks traded. This is a crucial indicator, which helps you to determine when there is particular momentum, positive or negative, in the market. Like the pricing, the volume traded bars may be color-coded.
The color refers to whether the closing price is up or down from the closing price of the previous day. A decrease is generally reflected in red and an increase is green or black. A closing price identical to the previous day's may be gray or black.
The color-coding is not fixed, so be sure to read the chart carefully and consult the key.
Watch for thinly traded stocks, or stocks that are traded at a low volume. These stocks are difficult to move and often cannot be sold without major loss.
You must also be aware of false signals, which make it appear as though a declining stock is about to go back up, but it is in fact going to keep falling. This may be due to timing lags, irregularities in data sources, smoothing methods, or calculation errors.
6. Look at the moving averages.
The moving averages are a key tool in stock analysis. A moving average is a calculation of a stock average price of a period of time that is constantly adjusted as time goes by. As a consequence, it is a lagging average that is intended to smooth out price fluctuations over a specific period of time.
On a chart these are generally indicated by lines which cut across the chart. The averages shown will depend entirely on the particular chart you are looking at, and you may be able to select different averages to view.
The moving average helps smooth out any major fluctuations in price.
They provide a clear general indicator of the change in price of the stock over time.
Moving averages can help identify a trend pattern, but there may be some lag as they refer to past prices.
Method 2 of 2:Reading a Stock Quotes Table
1. Identify the stock.
Financial newspapers are the traditional way to read up on the movements of stocks on the market. These may have been superseded by the more immediately updated information on the internet, but they can still provide a useful guide when researching stocks. The presentation may vary, but in general a stock quote chart should have around twelve columns.
The name of the stock will often be shortened version of the name of the company.
One column will show the ticker name for each stock.
The first two columns on the chart should be labelled “52W Low” and “52W High,” or something similar. The figures in these columns record the highest and lowest price at which the stock been traded in the last 52 weeks, or a year. This will be kept up-to-date, but in general will not include the trading from the day before.
This information gives you a useful picture of the longer term price history of a stock.
It can indicate a general pattern or trend, but should be supplemented by further research.
3. Check the price/earnings ratio.
4. Read the daily statistics.
The daily information of the stock will tell you the volume traded the previous day, the starting and closing price, along with the net change. The chart will also show you the highest and lowest prices at which the stock was traded on the previous day.
If the stock closed either up or down by more than 5%, that stock will be shown as bold in the chart.
This is an easy way to pick up the stocks that made the biggest moves, up or down, in the previous day’s trading.
Keep in mind that, even after the markets close, stock prices continue to fluctuate. This is because shares of stock are traded in other markets around the world 24/7.
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