How To Read Stock Charts

A quick glance at a stock chart can raise a plethora of questions. What does a stock chart signify? What are the numbers and graphs on the stock chart? How can the figures on the chart help make the right call? Why must you even use a stock chart?

Learning to grapple with a share market live chart can be a daunting task at first. However, with some fundamental guidance and a little practice, over time you will be able to use stock charts to discern winning stocks, buy shares and spot the accurate time to sell.

Understanding a stock chart

A stock chart or a table on the stock market is nothing less than a set of data concerning a company stock. It reveals information on share price changes, current trading price, dividends, trading volume, historical highs and lows and other relevant company data.

Here are some basic terminologies in a stock chart to help you read and understand.

52-week high and low: A key metric when studying a stock’s trajectory is the 52-week high and low in a given period or a year. This figure reveals the highest and lowest prices that a particular stock has traded within the year. However, a 52-week high and low value does not show the previous day’s trading price.

Ticker symbol: This symbol is used to describe a given stock on the stock exchange. For instance, the ticker symbol of Apple on NASDAQ is AAPL, Microsoft is MSFT, while that of Snapchat is SNAP on the New York Stock Exchange. You will find the symbol of a stock under a column titled ‘ticker.’ A ticker symbol is placed close to the name of the stock in parenthesis. Although some ticker symbols may appear like the company name, not every company ticker symbol resembles the name. And hence it is vital to ensure you are looking at the right company when searching for the ticker symbols.

Dividend per share: Some companies pay out dividends to their shareholders. These are mostly small amounts of pay-outs from the company’s profitability. The dividend per share of the annual dividend payment per share can be seen on the stock chart.

Price to earnings ratio (P/E): When studying a stock chart, every investor must look into a company’sPrice to Earnings Ratio (P/E). This key metric can be calculated by dividing the current price of stocks by the earnings made by the company in the past year (through four quarters).

Day high and low: Simply put, this figure reveals the highest and lowest prices at which a specific stock traded throughout the trading session since the market opened. The day high and low is not the same as the open and close prices.

Open price: This is the amount at which a company stock opens trading on any given day.

Close price: Perhaps more significant than an open price, a close price for most stocks is the rate at which a stock trades during trading hours. However, the stock price can be impacted by after-hours trading as well. If a particular stock closes above the previous close, it is regarded as an upward stock movement. Similarly, if the stock’s closing price ends below the last day’s close, it is said that the stock is showing a downward movement.

Previous close: This is the price at which a specific stock has closed the previous day, which is 24 hours prior.

Bottom line

A stock chart provides more than just necessary information about a company and its stock. A stock chart provides price movements, plotlines and charting that requires further study. Reading and interpreting stock charts can be crucial in understanding the company and stock’s historical performance. Reputed and full-service brokers such Kotak Securities offer trading advice and expert analysis in helping investors make the right trading decisions. Registering with a broking services company can help you study stock movements and trade effectively.

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