Introduction to Charting


 
Hello friends, How are you doing today? I am back today with a new post in which we are going to master the basics of charting, so let's begin with it.
A stock chart is nothing but a graphical representation of the price and volumes action in the market. The way price moved and the corresponding volumes highs, lows, open, close etc. There can be different types of charts we are about to understand them one by one:
1) Bar Chart- Let's see how a bar chart looks like 

This figures shows bar chart of Dlf for the period October 2014 to February 2015. We may notice that the chart consists of several bars. Each representing a day's price movement.



The green and red bars at the bottom represent volumes, that is the number of shares traded in a particular day. If the bar is high it represents high volumes if low it represents low volumes we will understand later what it signifies but as of now we just need to concentrate on basics of charting.



So we can look each chart is composed of several individual bars like this
         

The above figure clearly explains what each individual bar represents. The node on the left side signifies the open price and the right one represents closing price. while the high and lows are represented by upper and lower points of the bar. In charting softwares and website when you will hover mouse over a particular bar it will show the details with respect to  open, high, low, close and volumes of the stock on a particular day. We will discuss the softwares and tools we will be using for charting purpose later in this post keep reading.

2. Line Chart- In line charts we just plot the closing price of any stock in form of points on graph and then join the points and ultimately it looks like a line as in the figure below:



This is the graph showing line chart of Dlf for the same period we saw in case of bar chart. We can compare both and notice how the two are different from each other.

While the bar chart give entire date with respect of open, high, low, close etc. the line chart just gives the data with respect to closing price.



3) Candlesticks Charts- These are the most important and the ones which we are going to use. Candlesticks are Japanese version of bar charting and have got very popular because of the efficient amount of information they provide on the same chart. In order to understand the difference among the three forms of charts we will be using the same stock and same time period here as well. Let's have a look at the candlesticks chart of Dlf for the same time period

As in case of bar charts the graph consisted of several individual bars, in case of  candlestick chart it consists of individual candles each providing some information to us.

And one thing we are noticing here that some candles are black and some are white in some websites you may find combination of red and while. This to signifies something, if the closing price for a particular day is higher than the opening price then it the candle is white, on the other hand if closing price is less than the opening price that means that the candle will be dark or red. Remember here we are concerned with the price at which the stock opens and not the previous day's price. Suppose, a stock open 5% high as compared to previous day and closes at 4% high then the candlestick will be dark because the close was lower than the opening price despite of the fact we ended 4% positive.

Let's have a look what each individual candle signifies


The above figure clearly explains what and individual candlestick represents. the real body will be formed at the price levels where the most volumes were concentrated during the day. The upper thread represent high of the day, lower low of the day and the upper and lower points of the real body would represent open and close respectively. In case of dark candle the open would be upper point of the real body as close was higher than the open price. Depending on the way price movement is concentrated we can have different types of candles each signifying something. We will be learning candlestick charting in details in our upcoming posts.

I hope you must have got the basic concepts of what charting is all about and what the chart represents. At this point its not a bad idea to introduce you to some charting websites and software that you can use for charting.

http://chartink.com/

You can use the above website for viewing the charts of any stock just visit the website and search for your stock you will get the charts.

http://www.chartnexus.com/users/signupform.php

Here is something great, a free charting software specially for you people, just follow the link, fill in the details and get it downloaded

I personally use this software and its pretty good, for the first time it will take some time to download market data of past few years once done daily updates are light and simple around 5-6 mb which you can be updated at around 6 p.m. that's the time when the database are updated at the server.

If you are not comfortable with the software you can also use chartink.com that too provide good charting data.

As you will keep following our upcoming post you will learn how to make most of these tools and become a expert chartist. In our next post we will be learning about trend analysis.

Also check:

Technical Analysis: The Introduction
Dow Theory: The foundation of Technical Analysis

Happy Investing
The Stock King
                                                      


Previous
Next Post »

13 comments

Write comments
Anonymous
AUTHOR
February 9, 2015 at 8:10 PM delete

cool going :)

Reply
avatar
sridhar
AUTHOR
February 10, 2015 at 3:52 PM delete

Hi Abhishek , Well started .

Reply
avatar
Anonymous
AUTHOR
February 11, 2015 at 11:46 AM delete

Abhi Sir, What's your view on GTL Infra and Reliance Power at current Levels? Target Plz?

Reply
avatar
February 11, 2015 at 6:33 PM delete

both in strong downtrend avoid.....................

Reply
avatar
Anonymous
AUTHOR
February 12, 2015 at 8:58 PM delete

Already have this stock Gtl infra @2.60 and reliance power @ 65... what to do?

Reply
avatar
February 12, 2015 at 10:04 PM delete

my advvice would be to exit and shift to some fundamentally good stock and specially gtl infra is very bad one..................

Reply
avatar
Anonymous
AUTHOR
February 12, 2015 at 10:09 PM delete

Thank you so much....😊

Reply
avatar
Dhiraj Mark
AUTHOR
February 16, 2015 at 11:32 PM delete

Hello abhishek..any views on atlas cycles pls....

Reply
avatar
February 17, 2015 at 11:02 AM delete

avoid atlast................ coming facing issues since past 2-3 years

Reply
avatar
paras kumar
AUTHOR
February 21, 2015 at 3:25 PM delete

It's very interesting information u r sharing.
Thank you very much.
I want to learn more.
Please support.

Reply
avatar
paras kumar
AUTHOR
February 21, 2015 at 3:25 PM delete

It's very interesting information u r sharing.
Thank you very much.
I want to learn more.
Please support.

Reply
avatar
February 21, 2015 at 3:27 PM delete

keep learning buddy submit your email id at subscribe via email widget located upwards to receive free email updates of our blog posts

Reply
avatar
Anonymous
AUTHOR
May 24, 2015 at 7:56 AM delete

nice one!

Reply
avatar