How to Use Stock Market Charts in Your Technical Analysis of Stocks

According to the analytical methodology of stock market trading – everything has a cycle. Therefore, the use of charts, to technical analysis the anticipated movement of stock, is a tried and tested method of investment strategy among both professional and independent investors looking for good investment opportunities. In their analysis of any potential movement in a stock, both professional and independent investors make use of the following three principal stock market charts as investment strategy tools:

•  bar charts;

•  candlestick charts;

•  point and figure charts

Although a complete analysis of all three types of charts is vigorously undertaken by any professional stock market trader adopting a technical analysis investment strategy; as it is probably the easiest of the three types of charts to read, the bar chart is often the most commonly analyzed by independent traders. Conversely, point and figure charts are most likely the least often used, of the three types of charts, to track stock movement.

As their name suggests, bar charts a long line of bars. Here, if you are going to make use of a bar chart to assist you in tracking stock in the market, keep in mind that the vertical line is the highest price paid for a stock, the bottom line is the lowest price paid for a stock, and the horizontal slash is the current closing price.

Candlestick charts are probably the oldest means of technical analysis of stock. The system was first adapted in Japan, and is very similar to a bar chart. However, rather than using a slash to indicate the current days trading, the system adopts a hollow or solid bar – depending on whether the stock traded up or down – giving the appearance of a candle: hence the name.

Keeping an analytical track of stock, both over the short-term and long-term, can help you enormously when deciding whether or not to buy or sell stock as you'll be far more aware of the historic highs and lows of that particular stock – thus, enabling you to be better informed if the stock is going to break a new ceiling or fall through the floor!

Moreover, once you have become accomplished at reading charts to analysis the stock market, their use will become fundamental to your overall stock market investment strategy: assisting you to identify the business cycle and history of any given stock and, hopefully, provide some foresight into the next bull or bear movement.

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