5 Types of Stock Charts and the Components You Need to Read Them
5 Types of Stock Charts and the Components You Need to Read Them Skip to content
You own shares of Apple, Amazon, Tesla. Why not Banksy or Andy Warhol? Their works’ value doesn’t rise and fall with the stock market. And they’re a lot cooler than Jeff Bezos.
Get Priority Access For the most part, the structure of these charts is relatively similar. On the X axis, you’ll find the price of the stock and the Y axis lists the time at which the price was recorded. Here are the details of each commonly used kind of chart:
When a stock breaks past its 52-week high or low price, there’s a strong chance that significant movement will take place, continuing the upward or downward trend. Take a look at the chart below: Over the year prior to this writing, Apple traded with a 52-week low of $116.21 and a 52-week high of $170.30.
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By Joshua Rodriguez Date January 16, 2022FEATURED PROMOTION
So, you want to get started in the stock market? That’s an exciting move, giving you a way to let your money work for you. But before you dive in, you should take the time to learn something that all beginners should learn — how to read a stock chart. In a single chart, you’ll find all kinds of data ranging from historic performance to the real-time stock price. In the same chart, you’ll find indicators that suggest the best time to buy and sell as well as fundamental data that points to the strengths and weaknesses of publicly traded companies. While stock charts may look different from one brokerage or provider to another, the basics all remain the same. Here’s what you need to know.Types of Stock Charts
There are several types of charts, with the most commonly used being line, candlestick, bar, daily vs. weekly, and point-and-figure charts.You own shares of Apple, Amazon, Tesla. Why not Banksy or Andy Warhol? Their works’ value doesn’t rise and fall with the stock market. And they’re a lot cooler than Jeff Bezos.
Get Priority Access For the most part, the structure of these charts is relatively similar. On the X axis, you’ll find the price of the stock and the Y axis lists the time at which the price was recorded. Here are the details of each commonly used kind of chart:
1 Line Charts
Line charts are arguably the most popular charts among investors. Even Google and Yahoo! Finance display line charts as their defaults. As with all stock charts, the X axis represents price while the Y axis represents time. From there, a line plotting prices at different points shows the direction and historic performance of the stock or other financial asset.2 Candlestick Charts
With candlestick charts, instead of having a line plotting prices, these charts have red (for price decreases) and green (for price increases) candlestick shapes to indicate price movements. Each stick shows the open price, closing price, high price, and low price. A wide body of each candlestick represents the range between a stock’s open and closing prices; the wicks on each end represent session highs and lows.3 Bar Charts
Bar charts resemble candlestick charts, but what would be the body of the candlestick isn’t filled in. Instead, the top and bottom of each bar represent the high and low price, while horizontal lines between bars show the prices at which the stock opened and closed each trading period.4 Point-and-Figure Charts
Point-and-figure charts are the only style of stock chart that doesn’t follow the traditional structure of displaying open, close, high, and low prices over a period of time. Instead, these charts emphasize the closing prices of financial assets. The idea is to give investors a way to weed out the noise created by minor up and down movements and depict the grand scheme of things from a supply-and-demand perspective. On these charts, there is no time axis, only a price axis. When the price of a stock closes higher than the previous close, a column of X’s is plotted on the chart, while declines are plotted with columns of O’s.5 Daily Vs Weekly Charts
You may wonder whether you should use a daily, weekly, or monthly stock chart to make your stock market decisions. For several reasons, the best course of action is to look at all of them. Each can give you important information: Daily Stock Charts. The daily chart is best used once you’ve done your research and you’re ready to execute your trade. By analyzing the daily chart, you’ll be able to determine the direction of the asset in the current trading session, telling you whether you’re better off buying right now on a stock that’s likely to end the day higher, or wait until the closing bell nears on a stock trending down in the current session. Weekly & Monthly Charts. Weekly and monthly charts are beneficial when determining whether to invest in a stock at all. These charts help to weed out the noise of daily price movements, outlining broader trends. These charts also help to weed out the emotion caused by minute-to-minute price movements, giving you an opportunity to invest with a clearer mindset and a higher probability of profitability.Stock Chart Components
While each style of chart is different, they generally show the same data about a stock. You can find this data through a series of stock chart components, including:Company Name Exchange and Ticker Symbol
When reading a chart, you’ll want to make sure it reflects the right company. Lots of companies and ticker symbols are similar to one another. To ensure you’re looking at the stock for the correct company, find its full name, generally found at the top right of the chart, along with the exchange the stock trades on and the ticker symbol that represents the stock. An example of this is outlined with a red circle in the image below. This chart shows data from Apple Inc., a stock that trades on the Nasdaq exchange under the ticker symbol AAPL.Open
Charts use the term “Open” to list the opening price of a stock when the trading session started. An example of this is outlined with a red circle in the image below. This chart shows the opening price of Apple stock in the December 1 trading session was $166.16.Previous close
The previous close gives the closing price of the stock on the previous trading session. To find the previous close, open a weekly chart and hover your mouse over the previous day on the chart. An example of this is outlined by a red circle in the image below: Apple stock closed at $166.10 at the end of trading on December 1, 2021.High and Low
Highs and lows are important because they show the range of the stock’s price throughout the course of the trading day, showing the highest and lowest prices during the session. Highs and lows also help gauge the volatility risk associated with the trade. Stocks with high volatility will generally have a wider gap between highs and lows than stocks with low levels of volatility. An example of daily highs and lows on a stock chart is below: On December 1, 2021, Apple reached an intraday high of $166.25, and the lowest price experienced during that trading session was $165.71.Market Cap
The market capitalization, or market cap, is a key fundamental measure representing how large the company is. Small-cap stocks come with increased risk, while large-cap stocks offer more stable growth. On the other hand, small-cap stocks have historically outperformed their large-cap counterparts. Most stock charts list a company’s market cap in the stock summary rather than on the price chart itself. On Yahoo! Finance, pictured here, this data is available next to the stock chart before the chart is expanded to full screen and indicators are added: At the time of writing this article, Apple traded with a market cap of $2.687 trillion.P E ratio
The price-to-earnings (P/E) ratio compares the stock price to the annual earnings per share the company generates. For example, if ABC stock generates $1 in earnings per year and costs $10 per share to buy, it’s P E ratio is 10. Take a look at the example below: The chart shows that Apple’s P E ratio was 29.05 at the time of writing. That means at Apple’s current stock price, buyers of its shares are paying $29.05 for each $1 of earnings Apple generates.Dividend Yield
The dividend yield is the annual dividend expressed as a percentage of the share price. For example, if a $10 stock pays an annual dividend of $0.50, its dividend yield is 5%. The image above shows that at the time of writing, Apple paid an annual dividend of $0.88 per share, working out to 0.53% of its share price. That means each share of Apple stock you own would yield you $0.88 in dividend payments during the year.52-Week High & Low
The 52-week high and low are important technical levels, often perceived as the strongest points of resistance because they represent the highest and lowest prices a stock has experienced over the past year.When a stock breaks past its 52-week high or low price, there’s a strong chance that significant movement will take place, continuing the upward or downward trend. Take a look at the chart below: Over the year prior to this writing, Apple traded with a 52-week low of $116.21 and a 52-week high of $170.30.