How to Read a Indices 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 trading prices, the chart will also show the current price of indices and the chart will also explain historical movement of chart indices prices.
Traders will use these charts to determine where to place trades. From the chart the trader will analyze the stock indices trading market movements using technical indicators so as to determine the direction of the 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 trader will need to know about stock indices charts.
Types of Charts
There are three types of indices charts
Line Chart - this charting method draws a continuous line that connects the closing indices trading prices. For example if a trader is using the 5 minutes chart then this line stock indices chart will draw a continuous line that connects closing stock indices trading price of the stock indices trading market after every 5 minutes.
Bar Stock Indices Chart - This chart use bars to represent stock indices trading price movements, and plots OHCL - Opening indices trading price, High, Low, & Closing stock indices trading price for that period, for example if the period used is 5 minutes, the bar will represent the stock indices price data and OHCL points for the 5 minutes.
Candle Stick Charts - The are the most popular chart types as they are the most visually appealing and they represent the stock indices trading 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 Chart Periods - Chart Timeframes
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 timeframe, for example the 5 minute chart period is commonly referred to as the 5 minute stock indices chart by trader. This 5 minute chart timeframe 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 examples if a trader is using candlesticks stock indices chart, the data of one candle will draw data of that five minutes, after those five minute another candle will be drawn using stock indices trading price data of the next five minutes - when these candles are combined they then make a graph representation that shows the general direction of indices trading prices commonly known as the trend. Traders can then use this information to make trading decisions.
Because the most commonly used charts are candlesticks charts we shall discuss how to read indices charts specifically candlestick stock indices charts.
How to Use Candlestick Charts
The candlestick charts uses candle that have different colors to represent different stock indices trading price moves, blue candles show indices trading prices closed higher than they opened, red candlesticks show indices trading 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 candle sticks also show OHCL:
O - Opening Indices Price
H - Highest Indices Price
C - Closing Indices Price
L - Lowest Indices Price
These stock indices trading price points are represented using a formation which looks like a candle stick, distance between the opening stock indices price & closing stock indices trading price is represented by what is referred to as body, this part resembles the wax part of a candlestick. The high stock indices trading price is represented by a poking line protruding upward, this line resembles the wick of a candlestick, the low stock indices trading price is represented by a poking line protruding downward & it also looks like a candlestick wick facing down.
Candlesticks
A trader can also add a stock indices technical indicator on the stock indices chart so that they can interpret the chart market using these indicators. 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 technical 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 trader can use indicators such as the moving averages and Bollinger to determine the trend. 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 charts trends and these lines can drawn on the charts to show this direction. A upwards 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 trendline which is moving downward.
To learn how to draw a indices trend line & how to trade using technical analysis a trader can learn about the trend line lesson under the learn indices trading lessons section of this website, for indicators a trader can learn about stock indices indicators and their technical analysis on the stock indices indicators section of this site.
