Stock charts are essential for any traders starting out in penny stock investing. There are many different types of charts but today we’ll be taking a look at the three most common charts – bar chart, line chart, and candlestick chart.
Line Chart – The most basic type of stock chart, line charts are drawn from the closing price of the stock each day. They can be useful for looking at a stock’s previous price action over a long period, but bar charts and candlestick charts provide more information on a daily basis.
Bar Chart – Bar charts are easy to read and offer more information than line charts. When looking at a bar chart you will see each bar consist of one vertical bar and two horizontal ones. The vertical bar represents the trading range for the stock while the horizontal bars represent the opening and closing price of the stock. The left horizontal bar represents the opening price and the right horizontal bar the closing price.
Candlestick Charts – Candlestick charts are the charts you will use the most of while actually trading. They were created back in the seventeenth century by a Japanese rice broker. He created noticed that you could interpret movement in greater detail and it could give signals about possible movement of the price of rice. This same principle also works on stocks. Candlestick charts are very similar to bar charts in appearance except that candlestick charts don’t have the horizontal bars on them. Candlestick charts are color coded to represent positive or negative days. What makes candlestick charts so powerful are the signals that they give. For a more in-depth look at this you check out multiple books from Amazon below.
Being able to read and utilize stock charts will help you immensely when trading. While learning the ins and outs of candlestick charting can take time, it will be well worth it in the end.