Success in online trading, or any other form of financial investment in that matter, is hinged on market research and analysis. There is no any other way one can establish a successful career.
In financial trading, there are two methods of studying a chart. They are called fundamental and technical analysis. Fundamental analysis usually involves evaluating analogous financial, economic or any other quantitative and qualitative factors that can influence a price change of the underlying asset.
On the flip side, technical analysis involves evaluation of past price movements to predict future movements. Technical analysis is more reliant on charts compared to fundamental analysis but all in all, charts should be part and parcel of your trading life if you are to succeed in online trading space.
Although most brokers offer financial charts to assist traders in market analysis, traders have to perform Herculian work for better charting packages. Most brokers simply are not that interested in how well investors are doing. Their only concern is the deposits which users make on a weekly basis like clockwork. Hereinafter follows an explanation what exactly is a stock chart.
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Types of Stock Charts
A chart is a graphical representation of the underlying stock’s performance in a given period of time. In the world of finance, there are different types of charts which include are bar charts, line charts and candlestick charts. Although they are used for the same purpose, separate ones are more suitable for different purposes.
The inception of candlestick charts can be traced to the 18th century thanks to a Japanese rice trader – Munehisa Homma. Candlestick charts are very different from line charts but somehow similar to bar charts. One of the distinct characteristics is the fact that candlestick charts not only indicate the opening and closing prices, but they also outline the ‘distance traveled’ during this process.
In simpler words, candlestick charts are more complicated but they indicate way more important information for in-depth analysis. For instance, a long wick is indicative of the “long” distance traveled by the price before investors’ sentiment changed. Thus, causing a price reversal.
Bar charts, also known as Open Low High Close, are strikingly similar to candlestick charts with the only divergence being the physical appearance. The information displayed is the same. Meaning that bar charts also display the distance traveled by the price. Usually, the more preferred one is the candlestick chart over the bar chart. This is mainly due to the bright colors. Not to be taken lightly, each distinct nuance gives the ones that are viewing it a better perspective of the representation. Not to mention that the separate elements are more easily distinguished.
Line charts are the most basic type of charts and they are ideal for beginners and intermediate traders. Line charts only display the market price movement as a line but does not provide insight into the distance traveled by the price. Structurally, a line chart is a simple plot of the market price against time.
Where Can Traders Find a Chart?
Well, fortunately, most brokers offer price charts to their clients to assist them in analysis. To access price charts with some brokers, you only have to complete the sign up process after which you have unparalleled access to the entire education section. However, usually, brokers only offer line charts which can be boring and ineffective if you are an advanced trader. For a more seamless charting experience, you can always look up different sites offering education.
Although every trader’s dream is to make a successful financial trading, only a fraction of traders live the dream. Success in stocks and shares trading does not come easy as most people would think but ones has to be determined, patient and most important of all, cautious. Traders have to put great efforts into their research and analysis skills in order to be successful when trying out this opportunity.
The brokers that advertise their products as instantly amplifying the trader’s investment are a complete lie. Trading functions are great, but only when utilized with caution. This means performing regular check-ups. Also, executing thorough research of users’ opinions and satisfaction rates. This is the secret to success – hard work and attention to detail. And maybe a small amount of luck as a variable.