Using Stock Charts in Day TradingSunday, January 24, 2010 6:21 pm
Traditional trading in the stock market is not all that different than day trading.Â In day trading, basically all of your positions are closed at the end of a given trading session.Â A trading session is a trading day.Â While learning how to be a day trader is something you definitely want to take your time doing, it can be done.Â The best bet, as with just about anything, is to do it right the first time.
Day trading comes with a good amount of risk.Â That means that even though there is more and more talk of day trading, and more people are learning how to be a day trader for themselves, this is risky business and should be approached with that knowledge.
One of the aspects of how to be a day trader is reading stock charts.Â That means that you will want to learn how to read stock charts.Â Stock charts are used to help a traders keep track of the specific markets they are trading in.Â By knowing how to read stock charts, you can know how your markets are doing and thus know when to make trades.Â All stock charts essentially show the same type of information, such as prices (both past and current).Â However, there are three basic types of charts commonly used.
Supported by most charting software, Line Charts are used often.Â However, this type of stock chart shows only one piece of trading information.Â Â A line chart can be structured to show you any one of the following items:Â The Open, Close, High or Low of the trading time frame you are searching. This is what makes them easy to use.Â While ease of use is nice, once you learn how to read stock charts, you may desire more information than what a line chart can offer you.
When you begin to need more than one piece of the puzzle at a time, a bar chart may give you just what you need.Â Bar charts include all standard trading information.Â This means you will get opening price, closing price, highs and lows all at a glance.Â Bar charts, while they give you more than one piece of information at a time, are easy to read once you have a basic grasp on how to read stock charts.
Sitting right next to bar charts on the popularity table is the candlestick chart.Â The candlestick chart, like the bar chart, contains opening and closing prices as well as the highs and lows of the time period you are searching.Â Candlestick charts show whether the bar closed higher than it opened (an upward candlestick) or closed lower than it opened (a downward candlestick). Â By looking at the highs and lows of a candlestick chart, you can easily determine the range of the bar; the distance between the high and the low.
The information here is the very basic of the stock charts that help traders go about their day to day business.Â By learning how to read stock charts such as these, you can take a step toward securing your financial future.