Trade Stock Indices

How Can I Interpret a Indices Chart

When it comes to the market the chart is the basic tool used by all traders. The chart will show information about a indices instrument - the chart will indicate the general direction of prices, the chart also will show the current price of indices and the chart will also explain the historical movement of the chart prices.

Traders will use these trade charts to identify where to open trades. From the chart the trader will analyze market movements using indicators so as to identify the direction of the market price & determine the trade transaction to open.

Traders must therefore learn how to use charts before they can start transacting in the online market.

The following are the various things that a trader will need to learn about stock charts.

Types of Charts

There are 3 types of charts

Line Chart - this charting techniques draws and plots a continuous line that connects the closing prices. For example if a trader is using the 5 minutes chart then the line chart will draw a continuous line which connects the closing prices of the market after every five minutes.

Bar Stock Indices Chart - This chart uses bars to illustrate stock price moves, and plots OHCL - Opening price, High, Low, & Closing price for that period, for example if the period used is five minutes, the bar will represent the price data and OHCL points for the 5 minutes.

Candlestick Charts - These are the most popular/liked chart types because they're the most visually appealing/identifiable and they represent the 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 candle chart look like a candle and they have a body which resembles the wax part of a candle and an upper & a lower poking line that resembles the wick of a candlestick.

Chart Periods - Time-frames

A stock chart will draw charts based on different time periods - these are 1 minute, 5 minute, 15 minutes, 1 hour, 4 hour, 1 day, 1week and 1 month. The period used to draw chart info also is referred to as a chart time frame, for example the 5 minutes trading chart period is often referred to as the 5 min trading chart by the trader. This 5 minute chart time frame will represent info for the five minutes of trading, after those 5 minutes a different set of information will be used to draw another chart representation. For examples if a trader is using candles chart, the data of one candle will draw information of that five minutes, after those five minute another candle stick will be drawn using price data of the next five minutes - when these candlesticks are combined they then make a graphical representation that shows the general direction of prices often known as the trend. Traders then can use this information to make trade decisions.

Because the most often used charts are candlesticks charts we shall discuss how to read charts specifically candlestick charts.

How to Use Candlestick Charts

The candle charts uses candlestick that have different colors to represent different stock trading price moves, blue candles show trading prices closed higher than they opened, red candles show trading prices closed lower than they opened. This color representation is then used by stock traders to identify when price has moved up/down.

The candlesticks also show OHCL:

O - Opening Indices Price

H - Highest Stock Index Price

C - Closing Indices Price

L - Lowest Stock Index Price

These trading price points are represented using a formation which looks like a candle, distance between the opening price & closing price is represented by what is referred to as body, this part looks like the wax part of a candle. The high price is represented by a protruding line protruding upward, this line resembles the wick of a candlestick, the low stock price is represented by a protruding line protruding downward and it also resembles a candle wick facing down.

Candlesticks

A trader can also add a stock indicator in the chart so that they can interpret the chart market using these indicators. Traders will need to place indicators on the so that they can get additional/extra information about a market trend & hence be in a better position to make a more informed decision. These indicators can be used to predict the likely direction that the market is likely to keep moving in whether up or down.

One can use indicators like the MAs and Bollinger to identify the market trend. Traders also can use other indicators like the RSI & stochastics oscillator trading to identify when to open trades.

Trendlines are also used to identify the direction of the candle charts trends & these lines can drawn on the trading charts to indicate this direction. A upwards trend will be revealed by a trend line is moving up while a trend that is moving down will b e shown a trendline which is moving downwards.

To learn and know how to draw a trend line & how to trade using trading analysis a trader can learn about the trend-line lesson under the learn indices learning lessons section of this websiteesite, for indicators a trader can learn about stock indicators & their trading analysis on the trading indicators section of this web site.

More Lessons and Tutorials & Guides:

Forex Trading Seminar Gala

Forex Trading Seminar

Stock Index Broker