How To Read A Indices Trading Chart
When it comes to trading the stock indices trading market the stock indices chart is the basic trading tool used by all traders. The stock indices chart will show information about a indices trading instrument - the stock indices chart will show the general direction of indices prices, the chart will also show the current exchange rate of indices and the chart will also show the historical movement of chart indices prices.
Traders will use these charts to determine where to place trades. From the chart the indices trader will analyze the stock indices trading market movements using technical indicators so as to determine the direction of the stock indices trading market and determine the trade to open.
Traders must therefore learn how to use indices charts before they can start transacting in the online stock indices market.
The following are the various things that a indices trader will need to know about stock indices charts.
Types of Charts
There are three types of indices charts
Line Indices Trading Chart - this charting method draws a continuous line that connects the closing indices prices. For example if a indices trader is using the 5 minutes chart then this line stock indices chart will draw a continuous line that connects closing stock indices price of the stock indices trading market after every 5 minutes.
Bar Indices Trading Chart -This chart use bars to represent stock indices price movements, and plots OHCL -Opening indices price, High, Low, and Closing stock indices price for that period, for example if the period used is 5 minutes, the bar will represent the stock indices price data and the OHCL points for the 5 minutes.
Candlestick Indices Trading Charts -The are the most popular chart types as they are the most visually appealing and they represent the stock indices price movements in an easily identifiable way which clearly show when a market moves up or when it moves down using different colors to differentiate the direction. These candlestick stock indices chart look like a candle and they have a body that resembles the wax part of a candle and an upper and a lower poking line that resembles the wick of a candle.
Indices Trading Chart Periods -Chart Time Frames
A stock indices chart will draw charts based on different time periods - these are 1 minute, 5 minute, 15 minute, 1 hour, 4 hour, 1 day, 1week and 1 month. The period used to draw chart data is also known as a indices chart time frame, for example the 5 minute chart period is commonly referred to as the 5 minute stock indices chart by trader. This 5 minute chart time frame will represent data for the five minutes of trading, after those five minutes another set of data will be used to draw another chart representation. For example if a indices trader is using candlesticks stock indices trading chart, the data of one candlestick will draw data of that five minutes, after those five minute another candle will be drawn using stock indices price data of the next five minutes - when these candlesticks are combined they then make a graph representation that shows the general direction of indices prices commonly known as the trend. Indices traders can then use this information to make trading decisions.
Because the most commonly used charts are candlesticks indices charts we shall discuss how to read indices charts specifically candlestick stock indices charts.
How To Use Candlestick Indices Trading Charts
The candlestick indices charts uses candlestick that have different colors to represent different stock indices price moves, blue candlesticks show indices prices closed higher than they opened, red candlesticks show indices prices closed lower than they opened. This color representation is then used by stock indices traders to determine when stock indices price has moved up or down.
The candlesticks also show OHCL:
O - Opening Indices Price
H - Highest Indices Price
C - Closing Indices Price
L - Lowest Indices Price
These stock indices price points are represented using a formation that looks like a candle, the distance between the opening stock indices price and closing stock indices price is represented by what is known as the body, this part resembles the wax part of a candle. The high stock indices price is represented by a poking line protruding upwards, this line resembles the wick of a candle, the low stock indices price is represented by a poking line protruding downwards and it also resembles a candle wick facing down.
Candlesticks
A indices trader can also add a stock indices technical indicator on the stock indices chart so that they can analyze the chart market using these indicators. Indices traders will need to place indicators on the indices trading so that they can get additional information about a indices trend and therefore be in a better position to make a more informed trading decision. These indicators can be used to predict the likely market direction that the stock indices trading market is likely to keep moving in whether up or down.
A indices trader can use indicators such as the moving averages and Bollinger to determine the trend. Indices traders can also use other indicators such as the RSI and stochastic oscillators to determine when to open trades.
Indices Trend lines are also used to determine the direction of the candlestick indices charts trends and these lines can drawn on the charts to show this direction. A upward indices trend will be shown by a indices trend line is moving up while a indices trend that is moving down will b e shown a indices trend line that is moving downwards.
To learn how to draw a indices trend line and how to trade using technical analysis a indices trader can learn about the indices trend line lesson under the learn indices trading lessons section of this website, for indicators a indices trader can learn about stock indices indicators and their technical analysis on the stock indices indicators section of this website.
