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Charting Stocks – the way to Read Stock Charts For Options Trading.

The crazy thing is that out of all the courses I paid for, not one of them showed me not difficult to read stock charts secret. Now that I've learned it's time to give back and share what I know.

Since stock options are derived or come from stocks, it's necessary to find out how the cost of the stock is behaving as this will greatly affect your option's worth.

Charting stocks is no different than doing science experiments in class. You collect info ( stock costs ) and then that information is plotted so you can see the final huge image of what is going on.

Based on the way in which the stock chart looks, you will devise a trading plan and trade in the direction of the trend.

Charting stocks can protect you from big losses and help you further your option trading gains. To entirely use what the chart is telling you, you've got to first understand the fundamentals of reading stock charts.

What's a Stock Chart?

A stock chart is just a graphical illustration of the stocks price over a set time period. The chart shows you at a glance how a stock has performed.

There are three 3 basic sorts of stock charts ( bar, line, and candlestick ) and depending on your trading style, each chart will serve its own unique purpose. Regardless of what kind of stock chart you use, all 3 do nothing more than uncloak the purchasing and selling patterns of the investors.

This is something that is hard to discern by reading stock quotes in the daily newspaper. That's why charting stocks is becoming so useful.

four Key Areas of every Stock Chart:

There are 4 key areas you want to become acquainted with when charting stocks:

Identification Section.
Time frame.
Volume Bars.
"X" and "Y" axis.

Identification Section:

Company Name: Potash Corporation.
S 1000 tock Exchange Where Traded : New York Stock Exchange "NYSE"

Trading Symbol: POT.
Current Date: ( top left corner ).
Days Price Change : opening price, days price high, days price low, and closing price.
Volume: how many shares of the stock were traded for the particular time period.
Change: this is the day's buck change compared to yesterday's closing price. The dollar change and the p.c change will be listed.
Timeframe: the chart will display what timeframe you are viewing ( 1 year, 6 months, and so on. ). It is highly recommended to modify the time-frame to one that fits your trading style. Looking at a 3-6 month chart is necessary if you have a short term investing plan, and 1-5 years if you have a long-term investing plan.

Volume Bars: volume is commonly called the heart of the stock exchange. It is a key indicator of demand and supply. By looking at the volume bars you can get a warm feeling for the strength behind the stock price movement. A stock moving higher on heavy volume is far more certain to continue climbing than one that's moving higher on light volume.

"X" and "Y" axis: the "X" axis is the bottom portion of the graph, running horizontally, and it flows left to right. It is the portion of the graph that has the time frame that you're looking at. The left side is the past and the right is the present. We use the past as a reference, but we trade from the right side of the chart. We trade what we see now.

The "Y" axis is the right side of the chart, running vertically, and flows top to bottom. This portion of the graph has the price action.

basically for the beginner, charting stocks reduces down to 3 things:

*You're going to take a look at the link between a stock's price and volume activity ( as shown by the price and volume bars ).

*You're going to take a look at the chart and determine if the stock's price has been trending down or up. If it is's been trending up, I buy call options. If it is's been trending down, I buy put options.

*You're going to establish where the stock's support and resistance levels are. Support and resistance are areas where the stock has had trouble proceeding past, or an area where the stock halts and changes direction.

A stock chart can offer you a wealth of data as long as you know and understand what you're taking a look at. Basic charting knowledge combined with other stock indicators can massively improve your trading abilities.

Charting stocks has helped me find several worthwhile option trading opportunities to learn which are top stocks to buy now, and it's a skill that gets less difficult over time .

Tags: basics of reading stock, best stock to buy now, easy to read stock charts, stock books, understand stock charts