If you've ever watched financial news
or looked at the price of a stock,
chances are you've read a stock chart.
A stock chart is a graph that displays
the price of an investment over a period of time.
In this video, we'll discuss some chart basics,
view three common types, and show you
how each displays an investment's performance.
Finally, we'll introduce a few basics of technical analysis,
which is an investment strategy that
analyzes charts to help forecast future price movements.
Let's start with charts.
The main purpose of any chart is to display
the current price of an investment
and how its price has changed over time.
One of the most common chart types is a line chart.
A line chart is fairly simple.
Time is represented along the horizontal axis.
This time frame can be adjusted to show any period you want,
from minutes to days to years.
And price is represented along the vertical axis.
Points are added to the chart to display the investment's price
at the end of a trading period.
On a daily chart, this would be the closing price
at the end of a trading day.
On an hourly chart, this would be
the price at the end of the hour, and so on.
The points are then connected with a line
which provides an easy way to visualize price changes.
Often, another chart may be displayed just
below the line chart.
This chart displays the security's volume,
which is the total number of shares bought and sold
during each time interval.
Volume is a way to measure trading activity.
The higher the volume, the more buying and selling
there was during that time period.
Finally, let's examine the information covered
at the top of the chart.
This section includes the company name, the stock
exchange on which the security is traded,
and the current date.
This area also provides additional details on price,
such as the time period's opening and high prices.
The amount of information detailed
at the top of the chart will vary depending
on the chart provider.
Here's some information you might find on a daily chart.
The opening price is usually labeled open,
or it might be abbreviated as O. This is the stock's
price at the market's open.
The highest price the security reached
is labeled high or H. The lowest price the security traded at
is labeled low or L. The difference between the high
and the low is the range, which is labeled range
or R. The security's closing price is labeled close
or C. The closing price typically
the value shown in the line graph.
Then we have volume or V. This calculates how many shares
or contracts were traded.
Finally, we have the change.
This shows both the dollar amount and percentage change
from yesterday's closing price to today's closing price.
You can also view all this information,
like the opening and closing prices, on a bar chart.
This chart uses a vertical bar instead of a line
to represent price.
This bar provides additional details about price movement
during a single trading period.
The left tick is the opening price.
The right tick is the closing price.
The top of the bar is the highest price traded.
The bottom is the lowest.
Some investors might prefer a bar chart over a line chart,
because they believe it better reflects
market sentiment and the price action of a security.
In other words, you can see if other investors are
bullish or bearish on a stock.
You can also see this information
on a candlestick chart.
Candlestick charts feature the same components of a bar chart,
like the opening price, closing price,
and the day's high and low.
The lines above and below the body of the candlestick
can be referred to as wicks.
If a security closes higher than it opened,
the candlestick is empty or white.
But if the security closes that a lower price than it opened,
the candlestick is filled or black.
This use of color helps investors quickly identify
the security's performance.
Some investors might use a candlestick chart instead
of a bar chart, because they think
it's easier to identify market sentiment and patterns.
These patterns attempt to predict how the market will
move in the future.
For example, one particular candle shape
may forecast that the market is due for an upswing.
This is just one example of technical analysis.
There are a variety of techniques
that can be used to closely analyze trends, price
patterns, and volume movements.
All three chart types are widely used.
Generally, the type an investor uses
is often a matter of preference.
Next time you pull up a chart, try using a different chart
type, and see what you prefer.
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