Reading charts is an art form that can take years to fully master. Why do we read charts? Because, by reading charts, we can determine what the "big money" is doing! You have to be able to analyze a chart and come to a conclusion about whether or not to risk your hard earned money on a trade. And this is what separates the novice trader from the professional. There are several factors on a chart that make it worthy of trading. By analyzing these factors, we can determine with high probability which direction a stock will move.

There several questions that you want to ask yourself when you look at a stock chart. I know it seems like a lot of information to try and keep track of but all of the above questions are essential to chart reading mastery!

Now, copy and print out that list of questions and keep it handy next to your computer. Make several copies so that you can check off and make notes as you analyze your next chart. Got it printed out? Now you won't forget anything important when it's time to analyze a chart for your next trade. In the heat of battle, when emotions are running high, it is very easy to forget to look for some of the most basic things on a chart.

That is, until I made this list!

Ok, now let's go through the list one by one to make sure that you know how to answer the questions correctly. Don't worry, with practice, you will not even need to think about these things. It will become automatic. You will be able to read charts with lightning fast speed. In just a couple of seconds you will be able to glance at a chart and know all the answers to the questions above.

Stock Charting Basics: How to Read & Understand Stock Charts - Philip Davis | Seeking Alpha

This stock broke out through a consolidation in July and now it is in a nice strong trend. The arrow is the day on which we see this stock.

So, what questions can we answer just from glancing at this chart? You remember the stages right?

Understanding Stock Charts,Technical analysis fundamentals

Stage one is a consolidation, stage two is an uptrend, stage three is another consolidation, and stage four is a downtrend. This stock was in a stage one in July but at the end of July, it broke out into a stage two. It is currently still in a stage two. This is the easy part. If a stock is heading toward the upper right corner of a chart then it is in an uptrend! For some reason, this tends to elude some traders! Stock exchange uml diagrams do we know that?

The breakout signals the start of the trend. There has already been understanding charts stock market significant pullback. Had we bought stock on the first pullback, then we would have concluded that we are at the beginning of the trend. But since this is the second pullback, then we know that this trend may not last much longer. The ADX indicator not shown is near 30 which we consider to be a fairly employee share options tax treatment trend.

The higher the ADX, the stronger understanding charts stock market trend. This stock is at the lower trend line. You can see by the thick green line that this stock has hit the straddle option strategy calculator trend line.

You can draw the trend lines in manually, but after you have been trading for awhile, you will not need to draw them. You will be able to see them automatically. In Elliott Wave theorya stock goes through 5 waves in an uptrend.

In the chart above, the first wave after the breakout is wave 1. There is one more wave to go! Now we have identified that the possible future direction of this stock is up.

Nothing is ever certain in the stock market! However, by looking at this chart we can be certain that the probabilities are on our side for a continued move to the upside. After you finish reading this tutorial, run your scans and go through some charts.

Try to identify the various factors mentioned above. Just understanding the nature of stocks and the different stagestrends and waves that all stocks go through will greatly improve you trading.

Soon, all of this direction analysis will become second nature. You won't even have to think about it. This is one of the best swing trading courses available. Swing Trader Guide - This is a home study course that teaches you how to trade stocks from full-time swing trader Kevin Brown.

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Learn How To Read Stock Charts.

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