How to Read the Stock Market Chart

If you are new to the world of investing, you may struggle to understand the mysterious, complex-looking stock charts that riddle Google and Yahoo Finance. These graphs showcase dozens of tiny lines of different heights, along with numbers and statistics that compare current stock prices to past ones.

Though stock charts may look confusing, knowing how to read them can help you make the smartest decisions about when to sell and buy shares. And thankfully, they are not as complicated as they look.

Let’s talk about how to read the stock market chart and how it can benefit your investment activity.

What is a stock chart?

A stock market chart is a graph that shows changes in the price of a stock over time. Two of the most popular stock chart platforms in the U.S. are Google Finance and Yahoo Finance. You may also find Investing.com Live Stocks Chart and the Wall Street Journal Market Data helpful. Most stock charts show the following information:

Stock symbol: Every company in the stock market has a stock symbol, sometimes called a ticker symbol, which is a unique series of capital letters that represents the company. The stock symbol for Apple, for example, is AAPL.
Exchange: The exchange is the platform through which investors buy and trade stock. The most popular exchanges in the U.S. are the Nasdaq and the New York Stock Exchange.
Chart period: Most stock charts let you alter the chart period, or the time frame, that the data is showcasing. You can often choose between daily, weekly, monthly, quarterly, and annual chart periods.
Price change: The primary data that stock charts show is the change in stock price over time. Many stock charts indicate the following price changes:
- Open: The price at the beginning of the day
- Close: The price at the end of the day
- High: The highest price during the day
- Low: The lowest price during the day
Last change: This number indicates the net change from a previous price, such as the difference between prices yesterday and today.
Volume: Stock volume is the number of shares that people have bought and sold within a given period. If this number is low, few investors have bought the stock, so the trend may not last.

Some charts show more information than these listed, and some only show the essential data. Modern stock charts are interactive, so you can customize your graph to display your desired information. You can also personalize charts to create your own watchlist of a selected group of stocks or indexes.

Why use a stock market chart?

The stock market is unpredictable. Companies that can be on the high end of the market today can plummet without warning tomorrow. Your stocks that have held steady for years can take a drastic turn if a company goes bankrupt or the stock market crashes.

Though investors cannot predict the future, they can examine the past. Stock charts allow investors to compare current market trends to previous ones and view the overall picture of a stock’s success. Knowing whether a stock price is on the high end or the low end of its activity over the past six months is much more beneficial than knowing nothing at all.

Additionally, stock charts show valuable information about a company, such as:

How many people are currently buying or selling its stock
Whether a stock is behaving abnormally
The direction the stock appears to be heading

Viewing stock charts before you buy or trade will allow you to make the most informed decision about your investment. In turn, you can hold on to dividend gains longer, earn higher profits when you sell, and avoid sizable losses.

Terms to know

Stock charts often include financial terms that may be unfamiliar if you are new to the stock market. Before you dive into reading stock charts, make sure to understand the meaning of these terms:

Bullish market: A bullish market shows signs of continued upward movement. If an investor calls a trend “bullish,” that means that stock prices are rising.
Bearish market: In contrast, a bearish market indicates that stocks are declining in value, and the economy is heading toward a recession.
Line of support: Lines of support represent the price point that stocks are unlikely to fall below. You can draw a horizontal line under the lowest price point in a given period to indicate the line of support.
Line of resistance: Lines of resistance indicate the highest price that stocks are unlikely to exceed in a given time. You can draw a horizontal line above the highest price point to represent the line of resistance.

Parts of a google finance stock chart

If you are new to reading stock charts, you may find Google Finance’s charts simpler and easier to read than Yahoo’s. Here is a sample stock chart from Google Finance that shows the stock trends of the company Google:

Now, let’s break down all of the information in this chart, moving from top to bottom and left to right:

“Alphabet Inc Class A”: This title represents Google’s parent company, the company shown in this chart.
“GOOGL: This is the stock symbol for Google.
“$1,757.13”: This number is the stock price at the indicated time.
“+22.46%”: This percentage is the net percentage increase in the stock price in the given period (we had it set at six months, indicated by the blue-circled 6M).
“+322.26 6M”: This number is the net increase of the stock price over the given period (six months).
“November 30th at 11:17 AM UTC-5”: This is the time that you are viewing the chart. Google Finance updates its graphs every minute or so.
“USD”: USD stands for United States Dollars, or the currency indicated in the chart.
“NASDAQ”: Nasdaq is the exchange from which we pulled this information.
“1D 1M 6M YTD 1Y 5Y MAX”: These buttons let you toggle your view to change the period of the chart. We have 6M selected (highlighted in blue), so the graph shows the trends over the past six months.
Green trendline: This is a line graph, so the green line you can move across the chart shows the price on any given day in the last six months. The cursor is over August 10, 2020, and a white box indicates that the closing price on that day was $1,496.82.
“Compare to” boxes: You can select other popular companies to which to compare Google’s trends, or you can search for a company of your choice.

These are the essential elements of the Google Finance stock charts. Later, we will dive into how to read trendlines and data to make the best trading decisions.

Google Finance also shows other information about its companies on its stock chart pages. You can scroll down below the chart to view more information about the stock:

Hovering your mouse over each of the underlined terms will show you what they mean.

Google Finance also shows the quarterly and annual financial performance of each company in the following infographic:

Google Finance does an excellent job providing essential information about each stock without overwhelming investors with too complicated a graph or too many details. Seasoned investors may want to view Yahoo Finance’s stock charts for a more in-depth look at their companies.

Parts of a yahoo finance stock chart

Yahoo Finance offers more customization options for its charts than Google Finance. Here is a sample chart for the company Google (the same one we looked at above), this time from Yahoo Finance:

We will break down the information in this chart from top to bottom, left to right:

“Alphabet Inc. (GOOGL)”: This chart shows the stock trends for Alphabet Inc., the parent company of Google. This company uses the stock symbol GOOGL.
“$1,762.34”: This dollar amount is the value of the stock at the indicated time.
“-24.68”: This number is the net decrease in the stock in the indicated period.
“(-1.38%)”: This number indicates the net decrease in percentage form.
“NasdaqGS”: This stands for Nasdaq Global Sector Market, the index from which Yahoo pulled this data.
“As of 10:12 AM”: The Yahoo Finance chart shows the trends as of the time we were visiting the page.
“Short Term”: This box shows the predicted trends of the stock prices for a short-term period. “Neutral” means the price will likely stay stagnant, with no significant increases or decreases.
“Mid Term”: This box shows the predicted stock trends over a medium period. “Bullish” means that investors expect the price to rise.
“Long Term”: This box shows the stock trend predictions for the long term. Investors indicate that prices are “bullish” and will likely increase over time.
“Support”: Support is the value that the stock struggled to dip below. If a share is at a support level, it will likely not become much cheaper, so it is an excellent time to purchase.
“Resistance”: Resistance is the value that the stock had difficulties breaking above. If a share is at a resistance level, it will probably not get much more expensive, so it is an excellent time to sell.
“Stop-Loss”: The stop loss is the price at which the stock will limit losses if you decide to sell.
“Indicators”: Yahoo Finance lets you add indicators, such as the moving average or Bollinger bands, to your chart to interpret the data better.
“Comparison”: You can compare the trends for Google to those of other stocks from companies.
“Data Range”: You can customize which period the chart shows. This sample shows data from the last six months.
Blue trendline: This stock chart is a line graph, and the trend line shows the increases and decreases in the stock price over time.
White textbox: This box shows the open, high, low, close, volume, and percent change values for the indicated day, August 10, 2020.
Red and green lines at the bottom: These bars at the bottom of the chart help you visualize two key data points: the volume and percent change. The height of the bar lets you compare the volume to the surrounding days. The color indicates the percentage change compared to the previous day, with green representing positive and red representing negative.

Yahoo Finance lets you customize your graph so that you can view the data as a line graph, bar chart, candlestick chart, or several other options. You can also change the interval between data points and draw on the graph if you would like.

Yahoo Finance also offers some additional features through its Premium subscription, including access to reports from Argus Research. The Premium service also features technical charting, which allows you to compare multiple indices or stocks on a single chart.

Essential information in stock charts

Stock charts provide a lot of information to investors, some of which may be unnecessary for you. If you feel overwhelmed by looking at all of the above terms, you can focus on these two essential pieces of information that will help you make the best investment decisions: the trendline and volume.

The trendline

If you do not look at anything else on the stock chart, look at the trendline. This line indicates how stock prices have risen and fallen over your given period.

If prices are on the rise, you can expect them to keep rising. If they are on a downward trend, you can predict that the trend will continue. However, when looking at the graph’s overarching themes, you may see a noticeable pattern indicating how often prices rise and fall.

Consider what trends led to today and how those trends have repeated in the past six months or year. Remember that stocks take significant dives and make big climbs frequently, and though you may think a trend will continue, it could change instantly.

Volume

Volume is another essential component of stock charts. If you do not feel confident deciding when to buy or sell a stock, you can look to more seasoned investors’ trends to choose for you.

If stocks are trading at a low volume, there is not much interest from other investors, and you may have difficulty selling. In contrast, if stocks are trading at a high volume, you can expect your share to sell quickly and the cost to increase.

Types of stock charts

Yahoo Finance gives users the option to change their stock chart format from the traditional line graph to several other types of charts.

Though line charts are the simplest to interpret, area, candlestick, and bar graphs provide additional information that can help you understand the stock’s supply and demand.

Line chart

Line charts utilize a thin trend line to show how the prices of the stock change over time. These charts plot the closing price for each day as a data point and connect the points by a straight line. The resulting graph allows you to see how the price points have increased and decreased over a given period.

Though line charts are beneficial for gaining a quick understanding of stock trends, they do not show essential trading range information like open, high, and low prices for each day.

The samples from Google Finance and Yahoo Finance above are line charts.

Area chart

Area charts are the same as line charts, except they fill in the area between the line and the x-axis with a solid color.

These charts are beneficial when comparing several companies because they allow you to visualize the differences in trends more quickly. Some investors prefer to use them instead of line graphs because they clarify the data trends.

Candlestick chart

Candlestick charts are a bit more complicated than line charts, but they offer a wealth of additional information. The data points resemble candlesticks, with a rectangular “body” of the candle and the “shadows” or “wicks” jutting out from the top and the bottom.

When you view a candlestick stock chart, you should examine five key components of each candle:

The top of the body: The point coordinating to the top of the candlestick’s body represents the opening price of the day.
The bottom of the body: The point coordinating to the bottom of the candlestick’s body represents the closing price of the day.
The top wick’s height: The point coordinating to the top of the wick indicates the highest price of the day.
The bottom wick’s height: The point coordinating to the wick base indicates the day’s lowest price.
The candlestick color: Red candlesticks indicate a negative percent change from the previous day, while green ones represent a positive change.
Whether the body is filled or hollow: A filled body indicates the close was lower than the open, while a hollow body indicates the open was lower than the close.

It may take some practice to understand candlestick charts, but when you do, you will be able to review the trends quickly before executing a trade or sale.

Bar (OHLC) chart

Bar charts are the happy medium between line and candlestick graphs. They indicate four essential pieces of information—open, high, low, and close values— for each day.

You can see that each bar has a small line jutting out to the right and the left in the sample above. The left-facing line indicates the opening price for the day, while the right-facing one represents the closing.

Like the candlestick charts, the bar’s height indicates the highest and lowest price points each day. The color, red or green, represents the net decrease or increase in the stock price over the given interval.

Bar charts are more straightforward than candlestick varieties but provide more detailed information than the line graph. Many investors prefer these graphs over others.

Stock chart trending patterns

Once you understand the primary information stock charts display, you can begin to observe patterns in the data that will aid your investment decisions. These patterns are most evident in bar or candlestick charts because each data point shows OHLC data through the line height, creating visible shapes.

Ascending triangle: Ascending triangles indicate a stagnant high point with an increasing low point over several days. If you see this trend, you can expect a breakout to occur where the lines converge.
Descending triangle: Descending triangles have a flat top with a decreasing bottom, indicating stagnant highs and decreasing lows. These triangles often predict a trend toward a downward breakout.
Symmetrical triangle: Symmetrical triangles occur when prices have a decreasing high point and an increasing low point over several days. They may signify a breakout in either direction that follows historical market trends.
Double bottom: Double bottom trends resembles the letter ‘W’ with alternating decreasing and increasing data points. These patterns often project a shift toward an upward pricing trend.
Double top: In contrast to the double bottom, the double top resembles the letter ‘M’ with alternating increasing and decreasing prices. These patterns often predict a downward trend.

Keep an eye out for these trends as you begin reading stock charts.

Final thoughts

Stock charts may seem confusing and complicated at first, but once you understand their components and how they work together, you can see the overarching pictures that they represent. In time, you will begin reading charts like a seasoned investor and improving your investment game.

Keep in mind that, although stock charts may predict an upward or downward trend, these predictions do not always hold. Use your best judgment when deciding when to buy and sell, and remember that you can still lose money when a company seems to be doing well. It’s all part of the investment game.