Stock Charts Key Terms

Learn to read stock charts by knowing these key terms

By Mark Jenkins

Knowing how to read stock charts is an important skill not only for day traders, stock analysts and other financial professionals. It is important for anyone who runs a business to know how to read stock charts. With experience, you can use your knowledge of the charts to plan your investments, predict market trends and even track your own company's performance. However, before spending hours pouring over the latest graphs and data sets, it's helpful to familiarize yourself with these basic terms.

Candlesticks

Candlestick charts show three important pieces of information: a stock's closing price, its opening price and how actively professionals traded it during the day. Many traders consider these charts easier to read than traditional bar graphs.
Try: StockCharts.com has a guide to candlestick charts that explains how to interpret their different shapes and variations.

Point and figure chart

Point and figure charts show movements in stock price without showing the passage of time. They consist of columns of X's, which denote a rising price, and O's, which denote a falling price.
Try: For a brief but detailed graphical explanation of point and figure charts, head to Investopedia.

Support and resistance

When a stock moves below or above a certain price, it has reached its support or resistance level. These appear on stock charts as horizontal lines that cap peaks and valleys in the stock price.
Try: Support and resistance are much easier to understand if you can see what they look like on a chart. For that, check out The Stock Bandit.

Head and shoulders

The head and shoulders is one of the classic stock chart patterns. Caused by fluctuations in supply and demand, the pattern has three peaks and is a fairly reliable way to predict trends, especially when prices are on the rise.
Try: Take a quick look at the head and shoulders pattern at ChartPatterns.com.

Bull market

The term bull market describes a trend of rising prices. Increasing investor confidence usually spurs on bull markets and shows that stocks are in good health.
Try: The Wall Street Journal is a source of information about investing in bull markets. It also publishes stock charts from all the major exchanges, including the New York Stock Exchange and the NASDAQ.

Ticker

A ticker is a three- or four-letter abbreviation for a stock's name. For example, the tickers for Target and Wal-Mart are TGT and WMT, respectively. Memorizing tickers for the companies you've bought stock in is a good way to save time and avoid confusion while reading quotes and charts.
Try: There's a short definition of ticker symbols on InvestorWords.com. If you don't know your company's abbreviated symbol, you can look it up on Google Finance.