Stock Charting & Analysis
Investors use fundamental and technical analysis to select the best stocks. Fundamental analysis looks at a company's sales, earnings, products and market position. Technical analysis, meanwhile, looks at a stock's past price and volume action. Fundamental analysis helps find the best stocks, while technical analysis helps pinpoint the best times to buy them. Technical analysis is based on stock charting, which is a graphic representation of a stock's price and volume action.
Chart Construction
A chart's horizontal axis represents a time scale of anywhere from one minute to one month, with daily charts being the most widely used. The vertical axis represents a stock's prices. The price range for a chart's minimum interval -- such as a minute, hour or day -- is usually plotted with a vertical line, with the low end of the line being the low price and the high end of the line being the high price for the period. Most charts also show the volume of trading as a series of vertical lines in a separate graph at the bottom of the stock chart.
Types of Charts
Various charts that are used include line, OHLC (open, high, low, closing), bar, candlestick and P&F (point and figure). New charting methods are constantly being introduced, but they are all just different graphic representations of the same basic price and volume data inputs.
Online Charting
Most stock traders use real-time online charts which they can instantly customize for various time frames and even mark up by hand, and to which they can apply different chart analysis tools.
Predictive Value
Charts reflect what investors do, not what they think or say. Investor action in the market is influenced by basic human emotions such as fear, greed, pride and hope. Since human nature does not change, charts form recurring patterns that help investors predict future stock performance. Human nature also explains why chart patterns remain the same, even when market participants change.
Chart Patterns
Most of the time forming chart patterns is spent recording the activity of stocks. It's only when a chart pattern is complete that a trader can tell with a degree of certainty what the next move of significance is likely to be, and act accordingly. Chart reading skills depend on a chartist's ability to recognize various chart patterns and interpret them correctly.
Common Misconceptions
Investors often assume that a chartist can look at a stock chart at any moment and predict what the stock is going to do next. Since a majority of the time building chart patterns is spent tracking stocks, a chartist can only make a meaningful prediction when a chart pattern has formed and is correctly interpreted. Charts are not fail-proof; traders make mistakes interpreting them. Chart reading simply helps traders improve the odds of making a profit on a stock.
Read more: Stock Charting & Analysis | eHow.com http://www.ehow.com/info_8249879_stock-charting-analysis.html#ixzz1TUk3USTg
Chart Construction
A chart's horizontal axis represents a time scale of anywhere from one minute to one month, with daily charts being the most widely used. The vertical axis represents a stock's prices. The price range for a chart's minimum interval -- such as a minute, hour or day -- is usually plotted with a vertical line, with the low end of the line being the low price and the high end of the line being the high price for the period. Most charts also show the volume of trading as a series of vertical lines in a separate graph at the bottom of the stock chart.
Types of Charts
Various charts that are used include line, OHLC (open, high, low, closing), bar, candlestick and P&F (point and figure). New charting methods are constantly being introduced, but they are all just different graphic representations of the same basic price and volume data inputs.
Online Charting
Most stock traders use real-time online charts which they can instantly customize for various time frames and even mark up by hand, and to which they can apply different chart analysis tools.
Predictive Value
Charts reflect what investors do, not what they think or say. Investor action in the market is influenced by basic human emotions such as fear, greed, pride and hope. Since human nature does not change, charts form recurring patterns that help investors predict future stock performance. Human nature also explains why chart patterns remain the same, even when market participants change.
Chart Patterns
Most of the time forming chart patterns is spent recording the activity of stocks. It's only when a chart pattern is complete that a trader can tell with a degree of certainty what the next move of significance is likely to be, and act accordingly. Chart reading skills depend on a chartist's ability to recognize various chart patterns and interpret them correctly.
Common Misconceptions
Investors often assume that a chartist can look at a stock chart at any moment and predict what the stock is going to do next. Since a majority of the time building chart patterns is spent tracking stocks, a chartist can only make a meaningful prediction when a chart pattern has formed and is correctly interpreted. Charts are not fail-proof; traders make mistakes interpreting them. Chart reading simply helps traders improve the odds of making a profit on a stock.
Read more: Stock Charting & Analysis | eHow.com http://www.ehow.com/info_8249879_stock-charting-analysis.html#ixzz1TUk3USTg
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