How To Read A Day Trading Chart

by Manny Backus, Day Trading Strategy Expert

Charts are a key tool for traders.  They offer historical information about where a stock has been and clues to where it might go.  Things like support levels (prices below which is an indication why the stock has a hard time going below) and resistance levels (prices in which a stock has a hard time going above) are invaluable to a day trader.  These levels also show momentum moves and unusual volume which assist a day trader in predicting future price movement.  Thus, knowing how to read a day trading chart is obviously an important resource tool for the day trader.

In order to read a day trading chart, one must have knowledge and experience.  While there are a multitude of charts available in newspapers, magazines, and online, being able to understand a chart is critical in making a decision as to whether or not a transaction should be made.  The method by which one reads a day trading chart is known as technical analysis.  The chart may indicate a company’s earning report for a particular quarter, profits, sales, and other key information which allows a day trader to extricate all this information and make a sound judgment on the stock’s worth.

In order to make sound decisions on a particular stock, the ability to read a chart and its pattern is essential.  While there are different charts such as bar, candlestick, or line; becoming successful in day trading depends upon learning one chart well enough to be able to make decisions based on what the chart tells you.  One of the more popular charts has within it a one, two, three pattern.  It is easy to read, very reliable, and its pattern is easily recognizable to new day traders.

Here is an example of how to read a day trading chart.  First, when looking at a chart either from the NYSE, AMEX, or NASDAQ, note that the stocks which close above the five dollar range are shown in fractions.  Stocks listed in bold type means they have closed 5% higher or lower than the previous closing price.  Keep in mind, too, that stocks must close out at least one dollar and must trade at least 500 shares.  Conversely, stocks which have traded well over 500% above the 60-day average are underlined.

The following information was taken from http://www.tgmag.ca/tgof96/busness2.html in which a typical chart, as seen in the business section of a newspaper, will appear.  In order to correctly and articulately explain how a stock chart should be read, this 12-step guide is clearly designed to allow you to comfortably read any other charts with ease. 
1. Up/down arrows indicate a new 52-week high or low in the day's trading.
2. 52 week high/low: Highest and lowest inter-day price reached in the previous 52 weeks.
3. Stock: The names have been abbreviated.
4. Ticker: Basic trading symbol for primary issues (usually common).
5. Dividend: Indicated annual rate. It is also the interest given to you as a share holder.
6. Yield %: Annual dividend rate or amount paid in past 12 months as a percentage of the closing price in past 12 months.
7. P/E: Price earnings ratio.  This is the closing price dividend by earning per share in past 12 months.  Figures reported in US$ converted to C$.
8. Volume: Number of shares traded in 00s; nt means no-trade; z means odd lot; e means exact number of shares.
9. High/ask: Highest inter-day trading price or last asking price if no trading is done. "..." will be shown if there is no asking price shown.
10. Low/bid: Lowest inter-day trading price or last bid price if there are no trades. "..." will be shown if there is no bid price shown.
11. Close/last: Closing price or last board lot closing price in the past 12 months. "..." will be shown if there is no last closing price.
12. Net change: Change between board lot closing price and previous board lot closing price.
Keep in mind as well that technical analysis or stock chart reading is based upon the notion that all of the decisions have already taken place by other day traders and is already reflected on a stock chart.  The actions of these day traders help to develop patterns that anyone can learn in order to identify and project the price movement. 

The more you familiarize yourself with charts, the more comfortable you will become with the patterns and symbols contained therein.  However, once again it is important to use these day trading charts with clarity and purpose.  Emotions can play no part in how you read the charts, but must be looked at with discipline and sound interpretation.

Join a daytrading club with a proven track record and you could start making money as early as tomorrow morning. Sign up below to get more information:

First Name:
Email:

3435 Ocean Park Blvd. #107 PMB 334, Santa Monica, CA 90405
Phone 800-670-8332

Wealthpire Inc. All Rights Reserved.
Privacy Policy | Terms of Use