Tips to read market chart patterns

1. Identify the chart:

Identify the charts and look at the top where you will find a ticker designation or symbol which is a short alphabetic identifier of a company. It is important to have a correct symbol while looking for the company’s information.

2. Choose a time window:

This can be done on a daily, weekly monthly or yearly basis; depending on where you are accessing the chart you can choose the view. Looking at different timescale will help in identifying longer and shorter-term trends and check on consolidation. Remember and note the price on any given day and look for consolidations in the days that follow and check whether they form above or below the price.

3. Note the summary key:

You must also check the summary key as it will give you the key information from the chart in numerical values that you can read quickly. The summary must at least give you the latest price, the price moving averages and the volume traded.

4. Track the prices:

The chart is divided into two sections upper and smaller lower which guides on the prices. The upper part tracks the changes in the price of stock over the period. The prices are often shown with different colors like if the stock closed up on a particular day, the marker may be black. Whereas the price at which the stock closed may be marked in red.

5. Note the volume traded:

In the bottom, you will find the volume of stock traded. It will help to determine when there is particular momentum, positive or negative, in the market with color-coded bars. The color-coding is not fixed therefore requires careful reading. The color refers to the up and down of closing price with the previous day closing price.

6. Look at the moving averages:

It is a calculation of the stock average price of a period of time that is constantly adjusted as time goes by, it is a key tool in stock analysis. In charts, these are generally indicated by lines cutting across the chart. It can help in identifying a trend pattern but there may be some lag as they refer to past prices.