Price charts are graphs that show how a company’s publicly traded shares are performing. These charts can show a company’s stock performance over time periods ranging from several years to a few days. You can also even watch a company’s stock change throughout the day while the market is open. Charts are also used to show the live and historical prices of other markets such as Forex, Indices, Commodities, Cryptocurrencies and many others.
Charts can indicate a company’s performance over a number of years, tell you how much the stock is trading at and recent changes in the price, and give details about the overall company’s value.
Charts are often used by investing professionals, like investment bankers and stockbrokers, to help inform investment decisions and track company performance. But stock charts are also used by average people outside of careers in finance. Some people read stock charts because they have investments in the stock market or just because the performance of the stock market has a serious impact on the overall economy.
Charts are the primary tools for technical analysis. Charts conveniently visualize the price action by plotting the historical market data of the underlying financial instrument on a graph. This visual representation allows for easier identification of common and rare price patterns. Technical analysis tries to answer questions pertaining to the price action. What is the support and resistance? What is the trend? Where is the stock going? What is the sentiment on this stock? The answers to these questions are ultimately played out in time. Charts help traders to map out the price history and forward trajectory to make better-informed trades.
Components of a price chart can include:
- Open: What price the stock was at when the market first opened for the day
- High: The highest price the stock has been at, for that day
- Low: The lowest price the stock has been at, for that day
- Mkt cap (market capitalization): The total value of all the company’s stocks owned by shareholders
- P/E ratio (price/earnings ratio): A ratio of the company’s share price to the company’s earnings per share
- 52-week high: The highest price the stock has traded at in the previous 52 weeks
- 52-week low: The lowest price the stock has traded at in the previous 52 weeks
- Div yield (dividend yield): A percentage showing how much of the company’s share price it pays out each year in dividends to shareholders (Not every company will have a dividend yield.)
Using these components, you can begin to understand how the company has performed in the past. This information is pivotal to make predictions about how a company will perform in the future. Companies with steady, gradual growth are likely to continue that growth, barring any big economic changes (like a recession).
Charts primarily give you an idea of if the company is worth investing in. For example, a momentary slump in stock prices after a long trend of growth may be a good opportunity to get in when the share price is low. Or, a relatively new company that is performing well but has cheap share prices can be a good chance to get in early before the company really takes off. (Note: This example is for educational purposes; consult a financial adviser for specific stock-picking advice.)