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If you are new to the stock market, then understanding stock market charts can be tasking. But to find a viable investment, understanding stock charts patterns is paramount. Explained below are the various stock chart patterns to add to your core skill set.
What is the stock market chart?
Charts showing the current trends and trend reversible of the different stocks under Sensex and Nifty 50 are known as stock market charts. The chart is a graphical presentation showing signs of future price movements and signals the buy and sell patterns.
Types of stock market charts
| Chart
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Description
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| Head and Shoulder | This is the reversal chart pattern showing the movement of the securities, whether it will move according to the previous trend or not.
The pattern shows one head and 2 shoulders which predict a bullish to a bearish trend.
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| Daily Bar Charts | Bar charts are the most common charts that are used by the traders that show the opening price, closing price. The highest price touched in a day and the lowest price of the day.
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| Line Chart
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Line charts maintain the record of the closing price of the stocks every day.
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| Candlestick Chart
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Candlestick chart shows the highs, lows, open, and closing prices of a security for a certain period. This pattern has a wider body and two thin lines showing the open and closing price and the highest and the lowest price of the day. The wide part shows whether the closing price was higher than the opening price or lower.
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Point and Figure Chart
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It is a graphical representation of the stock prices, which shows the stock prices against the changes in the direction not against time. It shows the changes in the direction by plotting column of Xs and column of Os when prices rise and fall respectively. |
How to Read the Chart?
Know the charts- You need first to identify the charts and also know the correct symbol of the company. You can click on the symbol to know about any company under Nifty 50 or Sensex and how is it performing.
Choosing a time window- You can choose a window depending upon the daily, weekly, monthly or yearly basis. You can check on the consolidation depending upon the longer and shorter-term trends, and then follow up on the price fluctuations.
Know the summary key – You can also check the summary key that gives the numeral value and an easy understanding of the key information. It gives you the latest price, the moving averages and the volume traded.
Keep a track on the prices- The charts show the prices in different colours, for instance, if a stock closed on a date, it has a different colour while the price at which the stock closed has a different colour.
Know the volume of the trade– In the bottom of the chart, one can find the volume of the stock that is traded, which can be used to understand the momentum whether positive or negative. The volume of the trade is marked by different colour- coding, which keeps varying.
Check on the moving averages- Stock price averages are calculated over a period of time and is adjusted regularly. This is the major line that identifies the trend pattern. Understanding the stock price average would help to understand the trends better.
