The stock market can be can be very intimidating to the novice investor, especially in times of high volatility. Learning the basic skills in penny stock trading, such as how to read stock market quotes is very important. This is because once you have this basic skill, it will be a lot easier and quicker to understand the more complex areas of penny stocks trading. By the time you finish this article, you’ll learn how to read stock market charts, especially if you are a beginner in trading.
The first thing to do is to find a good site on the internet where you can find free stock chart. Sites like yahoo finance, google finance, marketwatch.com, stockCharts.com etc. You do not need to register in order to access these free stock charts. The free stock chart helps you to predict the future of a particular penny stock, and have a clear picture of market trends.
The OHLC charts are the common type of free stock charts. OHLC simply means Open, High, Low, Close chart. The OHLC chart is divided into two – the plain vanilla and the candlestick chart. These charts contain the following basic information:
The time frame which could be in months, days, hours, or even minutes.
The high and low values of the period,
The volume story of the stock.
The opening and closing price.
Understanding the stock charts:
1. The volume bar
The volume of the stock is indicated by two vertical lines in the charts. One is at the bottom and the other is located a bit above it. Often there is a line at the lowermost part of the chart that corresponds to the one above. The lower bar is the volume of the stocks at a given point.
2. The High and Low Value Indicator
The bar (vertical) placed on top of the volume bar indicates the low and high values. The top part of the bar is the high value and the bottom part of the bar is the low value.
3. The Open and Close Marker
Some stock trading charts have short and stout bars with a thin line inside it. This thin line is called wick or tail. This is where the name candle stick is derived. The thin line or the wick signifies the low and high values, as explained above. The fat line, which also looks like a short bar covering the thin line, indicates the open and close values. To differentiate the open from the close, the bar is shaded. If it is filled with black (or red on some web sites), the close was lower than the open, so the top of the body indicates the open and the bottom marks the close. If the body is filled with white (or green on some sites) the close was higher than the open, so the top shows the closing point and the bottom is the open. The shadows are thin lines that extend above and below the body to show the range between the days high and low.
However if a stock opened and closed at the same price there would be no body because there is no change in price. You will discover that there are different types of stock charts. Some are presented in line or bar graphs but once you understand the basics, you will be able to use the data they provide.