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Beginner guide
How to read a stock chart
A stock chart shows how a share price has moved over time. Learning to read one takes a few minutes and makes it much easier to understand news, research pages and conversations about a stock. It shows what has happened, not what will happen next.
The two axes
The horizontal axis is time: days, months or years depending on the view you choose. The vertical axis is price, in the currency the stock trades in. A line moving up and to the right means the price rose over that period.
Line charts
A line chart connects one price for each period, usually the closing price. It's the simplest view and the best place to start. The 60-day charts on StockSignalCheck's stock pages are closing-price line charts.
Candlestick charts
Each "candle" shows four prices for one period, often one day:
- Open: the first trade of the day.
- Close: the last trade of the day.
- High and low: the most and least anyone paid that day, shown by the thin lines (wicks) above and below.
The thick part (the body) runs between the open and close. It's usually green or hollow when the close was above the open, and red or filled when it was below. A long body means a big move during the day; long wicks mean the price swung a lot before settling.
Time frames change the story
The same stock can look like it's soaring on a five-day chart and falling on a one-year chart. Before drawing any conclusion, check which time frame you're looking at, and switch between a short and a long view. For long-term investors, the one-year and five-year views usually matter more than the daily wiggles.
Volume
Many charts show volume as bars along the bottom: how many shares traded each period. Big price moves on heavy volume suggest many buyers or sellers were involved. The same move on light volume can be less meaningful, because fewer trades were needed to push the price.
Moving averages
A moving average is a line showing the average closing price over a set number of days, such as 20, 50 or 200. It smooths out daily noise so the overall direction is easier to see. A price above a rising average is generally described as an uptrend. Our guides on moving averages and the 200-day moving average go into more detail.
Support and resistance
Chart readers often point out price levels where a stock has repeatedly stopped falling (support) or stopped rising (resistance). These levels can reflect where many buyers or sellers have acted before, but they're rough zones rather than exact lines, and they break all the time.
Linear vs log scale
On a normal (linear) scale, a move from $10 to $20 looks much smaller than a move from $100 to $110, even though the first is a 100% gain and the second only 10%. A log scale shows equal percentage moves as equal distances, which is more useful for long periods or stocks that have grown a lot.
Adjusted prices
When a company does a stock split, its share price drops overnight without anyone losing money. Most charts adjust past prices so splits don't look like crashes. Some also adjust for dividends. If a chart shows a sudden cliff, check whether a split happened.
Common mistakes
- Treating a chart as a forecast. Past prices don't predict future ones.
- Ignoring the time frame or the scale.
- Reading too much into a single day. One big candle is often just news or noise.
- Forgetting the business. A chart says nothing about earnings, debt or valuation. See momentum vs value.
Keep learning
This guide is for education only. It isn't personalized financial, investment or tax advice, and nothing here is a recommendation to buy or sell any security. Investing involves risk, including the possible loss of your money.