Shares are named concerning to the particular company. Stocks are referred to all the shares present with multiple companies at one point in time. Understanding how the share market or stock market works is crucial to invest in this volatile industry and make profits in the long term. There are different ways in which the share market is studied. Some of the most common types which are utilized to read share market and stock charts include the following:
Line Charts: In these types of stock charts, two factors, including prices and time interval, are considered while studying the share market. With just one single line, the stock trading analysts find out the performance of different types of stocks. This type of reading of the share market is performed to allow a general analysis of the specific stocks. The peaks and valleys present in the graph ensure to find out the current scenario with the shares.
Bar Charts: Bar charts are popularly called as open-high-low-close (OHLC) charts. Here, the lowest and highest prices are determined in the focus time. At times, colors are used to determine net gain and loss with green and red colors, respectively.
Point and Figure Charts: Here, points, X, and O are the three parameters to create a stock chart to analyze respective stocks. The rise of the prices is demarcated with X, and the fall of the prices is indicated with O.
Candlestick charts: This is the most frequently used form of stock chart to study the share market. Candlestick charts came into existence from the country of Japan.
Methods of reading the stock charts in the share market: There are two primary methods of finding out how stocks perform in the stock industry. To read stock market charts, three factors are taken into consideration. This includes trends, support, and resistance. As the name suggests, the trend is the combination of ups and downs in the stock market industry. Up trends are the ones where the respective stocks in focus possess higher highs and higher lows. When the stocks face lower highs combined with lower lows, then they are termed as low trends. Price support levels and price resistance levels are calculated to study the chart in the share market.
Price Support Levels: A particular stock price range at which stock trends keep reaching repeatedly is known as the price support level. This is the most common and popular feature of the stock charts. When the support levels are higher, then it indicates the presence of the up trends. In cases where the resistance level is strong, the support levels fall. This is visible on the stock chart.
Price Resistance Levels: Price resistance mainly shows the presence of stock sellers who are trying to sell their stocks at repeatedly than it is expected. Low trends or downtrends often indicate that the sellers have become impatient towards keeping their stocks. In such cases, shareholders need to be guided in the right way, so that they can hold their shares and let its value grow over time.
Thus, understanding the functioning of the stock market chart is essential to invest in the right manner. The main goal of learning the basics to read the stock market charts is to ensure that an investor does not put his hard-earned money into the non-performing shares. This will help in taking the required measures in terms of investing wisely in the field of the stock market. Share market is a compelling financial sphere if it is learned in the right way. Therefore, it is highly recommended to first learn the basics of this financial sector and progress with the investment.