About Stock Market Charts

Posted on February 13th, 2010 by Jim R

Stock Market Charts.

A stock chart provides a graphic representation, a picture, of the price and volume action of a stock over a pre-selected period of time.

In other words, a picture from which you can see how the price of a stock has fluctuated, its highs and lows of each day or each week or each month, or longer, and how it has changed overall during the past until the present. Where it was at the start, where it has been, and where it is now.

The changes in price over time shown on the stock chart are accompanied by a graph of changes in the number of trading transactions that occurred during each of those particular time periods, referred to as volume, and that volume is customarily recorded on the chart below the fluctuating price line so in this way the correlation between price and volume changes can readily be seen.

As well as depicting the movements of an individual stock, the chart can instead similarly show the price and volume changes for a group of stocks, a few or many, for instance, all the stocks in a sector, or all the stocks on any or all of the stock exchanges, or any other selected group of combined issues.

A versatile tool
The stock chart that shows price and volumes over time is a versatile tool for the viewer to gain an insight into what has happened and is currently happening to a particular stock or group of stocks. It helps in understanding patterns of price changes or other characteristics from which might be deduced possible future movements of the stock as new or similar events occur in the immediately following and future time period.

It is important that those wishing to learn how to trade stocks should become familiar with chart patterns, some of which are often common to a wide range of stocks.

Just imagine how you would be able to profit if you could accurately forecast the future price movement of a stock from a stock chart. However, to understand and interpret a chart can be complicated process with little certainty that any projections into the future will actually occur. The interpretation of a chart is an art not a science but is nevertheless, on many levels, a very useful and valuable tool. The reading and interpretations of charts is part of a wider topic known as technical analysis.

While price and volume are the major component of charts, they are usually accompanied by graphs of several other properties related to the price and volume action that has taken place.

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