In today’s financial world, the saying “knowledge is power” applies more to investors and traders than ever before. Understanding how to read stock charts is an important part of technical analysis and has become virtually essential for any risk-taker looking to achieve long-term success in the financial markets. For example, it helps to know how to read Robinhood charts if you’ve put all your eggs in the Robinhood basket. Moreover, understanding a range of charts helps you see more aspects of the market that the average retail trader would not see.

For traders, knowing how to read stock charts and interpret their data opens up various intraday and swing trading opportunities. Investors can also quickly peruse a chart to assess how a stock has performed over a specific period of time to understand better how the stock might perform in the future. If you’re new to trading or investing, learning how to read a stock chart as part of technical analysis can provide a solid foundation for forecasting future price action even in turbulent times. 

A stock chart is a graphic depiction of the price of a stock and how its price has changed over a certain period. It’s generally drawn on a grid and provides detail on the current price and historical price changes. At the same time, it can also include information such as volume and the company’s financial information. The chart’s horizontal or X-axis shows the dates of price observations in an order further from the present as you move your eyes left. 

The chart’s vertical or Y-axis shows the price level of the stock that increases when looking upward and decreases when looking downward. A stock chart will often include technical indicators in a box below the price action as well as price action overlays like a moving average (MA) of the price taken over a certain number of days. 

This example of a stock chart depicts the price of Apple Inc. (AAPL) over the past year. It includes a 20-period MA drawn in red and superimposed over the price action, as well as blue dots from the parabolic SAR indicator that gives trading signals intended to reflect short-term accumulation and distribution activity in the stock. The trading volume figures per period appear in light red and green along the bottom of the chart, with their 20-period MA shown in orange. The circled E and D letters along the bottom represent the ex-dividend and dividend payment each quarter for the stock.

Most stock charts depict the price of a stock in these basic ways:

Line charts: This straightforward type of chart shows the price, as, you guessed it, a line, at any given point during its trading day, typically the closing price, with a single point. Each price point is connected to adjacent prices with lines. 

Bar charts: The more sophisticated bar chart shows the range of the stock for the period charted by drawing a vertical line or “bar” from its high to its low price. A horizontal “flag” is then drawn to the left and to the right at the opening and closing stock price levels respectively. 

Candlestick charts: Invented in Japan, the candlestick chart is packed with even more information than a bar chart. The color of each candlestick indicates whether the stock’s price closed up or down for the period. White and black or green and red are the most popular color schemes, with white or green for up periods and black or red for down periods.

The candle’s “body” shows the range of the stock price from open to close, while 2 wicks extend from the top and bottom of the candle’s body showing the upper and lower levels respectively of the stock’s price range. Interpreting candlestick charts according to the traditional Japanese system evolved over centuries of market observation lies outside the scope of this introduction. However, it is worth researching to help boost your forecasting abilities. 

After reviewing the different types of stock charts, one thing becomes clear. An essential component of understanding how to read stock charts is knowing which chart you prefer.

Reading trend lines is a way to assess whether a price trend exists for a particular stock. Price trends are directional movements that consist of a set of higher highs and higher lows in a stock’s price. 

Trend lines can be drawn between those highs and lows, and they can provide technical analysts with a quick visual assessment of whether a trend exists and to what degree. 

Many analysts also use trend indicators along with drawing trend lines, such as the 200-, 50- or 20-period MA. 

Stock splits generally occur when a stock has risen significantly enough to make the stock price too high for average investors to buy in round lots of 100 shares. Thus, the stock split makes the stock available to more investors and generally fuels more demand, often causing the stock price to gain after the split. 

For example, if a $100 stock splits 2 for 1, then the stock would open at $50 per share the next day — existing stockholders would then own twice the amount of stock they did before the split. A reverse stock split is the reverse of a stock split. For example, a stock trading at $1 per share has a reverse 10 to 1 stock split. For every 10 shares owned, the stockholder would subsequently have 1 share at $10 per share.

Stock splits and reverse stock splits are generally adjusted for on a stock’s price chart on the day the split occurs. You do not have to take splits into account when reading stock charts produced by professional charting services or trading platforms. 

The degree of interest that the market has in stock tends to appear in the stock’s trading volume numbers. Notable shifts in trading volume can offer a helpful indication to support a directional movement in the stock. 

Keep a keen eye on volume figures since changes in the stock’s activity level can confirm breakouts from the classic continuation and reversal patterns technical analysts look for in a stock’s price — they can have predictive value.  

If a stock’s price increases on a large amount of volume, for example, it’s probable that the stock will continue to rally and therefore tends to confirm the upward move. The same concept tends to hold if a stock declines on a large amount of volume. When stocks fall, volume tends to increase incrementally as stops are hit, which can further fuel the decline and can even cause a crash. 

In addition to the price information appearing on a stock chart, a number of other important fundamental stock data is often included with the graph. This information has considerable significance to stock traders and is referred to with specific terminology. Whether you came here to learn how to read Robinhood charts or uncover a few pointers, these terms are universal:

Top online stock brokers generally provide excellent charts to their clients. In addition, a number of nonbroker websites like TradingView provide excellent stock charts free of charge. Benzinga has compiled a table of online brokers with the best stock charts below. 

Claim Exclusive Offers

Benzinga is compensated if you access certain of the products or services offered by eToro USA LLC and/or eToro USA Securities Inc. Any testimonials contained in this communication may not be representative of the experience of other eToro customers and such testimonials are not guarantees of future performance or success.

While some people may see the interpretation of stock charts by technical analysts to forecast the market’s future direction as something like palm reading, the majority of market professionals depend on stock charts to get a clear picture of price action in the stock they’re operating in. You start with, “I need to know how to read Robinhood charts,” and you end with, “I want to see more information,” because you better understand stock trading and how each chart affects your decisions.

Most would agree that the condensed information contained in a stock chart gives them an edge when making trading and investing decisions. So, if you’re serious about operating in the stock market, it makes sense to learn how to read stock charts as the professionals do to give you a better chance of success. 

Some of the best techniques involve looking for support levels, resistance levels, trend lines and changes in the volume. 

Webull, TD Ameritrade and Robinhood offer the best charts.

Related Content: FREE STOCK MARKET API TRIAL