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Reading Stock Charts: Stock Market Basics for Investors

By Edited Feb 27, 2016 1 0

How good are you at reading stock charts?


If you can't read stock market charts, it becomes extremely difficult to make wise investments.

Once you know about reading stock charts it becomes much easier to understand what your stocks are doing in the marketplace and this can empower you immensely.

Whether you want to work together with your broker or do a little investing on your own time reading stock charts can make a huge impact on your returns.

It's very important to be well-equipped as you approach all of the new software available at your disposal when you make your stock market investments. Otherwise, it won't do you any good.

reading stock charts

Some people think that reading stock charts can only tell you a few things about your stocks, but modern charts can do all kinds of complicated things.

When you look at a stock chart, you should be able to read the following things:

  • What stage the stock is in

  • Whether it is trending up or down
  • Where it is in this trend

  • The strength of the trend

  • What wave the stock is currently in

  • What the moving averages mean

  • Support and resistance levels

  • What the volume tells you

  • Whether or not the stock has reached the Fibonacci level



One of the easiest things to see when reading stock charts is whether or not the stock is on an uptrend or downtrend.

You should be familiar with whatever form you have chosen for your chart, whether it be a line graph, a bar graph, a dot plot, and so on. If the line (or bar, or dot) is rising towards the upper right hand corner, then your stock is in an uptrend—congratulations!

If it slants downward, then it's in a downtrend. This much should be obvious to most people.

But for other ground-floor basics, you should do some intensive homework and get a good idea of what various stock market terms mean. Once you have the general idea of it, be aware that there are four phases to every stock cycle.

They are consolidation, followed by uptrend, followed by a second consolidation, followed by a downtrend. This will help you predict what your stock will do when you are reading stock charts.

A quick rundown of other indicators includes the ADX listing—if this number is high, your stock is strong. You should also know the symbols that your chart uses for breakouts and pullbacks, the basics of the Elliott Wave theory, and how to run the scans that your stock chart supports.

Once you know the essentials, you will have all the tools you really need for playing the stock market with confidence.


For more help reading stock charts I highly recommend the book: Chart Your Way To Profits: The Online Trader's Guide to Technical Analysis. It's an excellent book that gives you very detailed information about reading charts.

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