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Every player in the stock market was once a beginner.  Where else would you begin your climb in this career than in the bottom rung of the ladder?  If you’re smart enough, though, you can chart your course to success by being well-informed.  What you lack in terms of years of exposure and experience, you could make up for by learning how to read stock charts.

What exactly do the charts have to show?  When you open a financial magazine or scan a stockholder’s report, you will always encounter a stock chart.  It can be confusing and overwhelming when you don’t know exactly what the lines show and what highlights to focus on.  Unfortunately, stock charts can’t help but be technical in their approach, but there is an easier way of analyzing them from the viewpoint of a beginner.  Let’s take it point by point.

All about trends
Stock charts are all about short-term and long-term trends.  On a moving average of 20 days or 50 days, for instance, you will see at which stage a stock is in, in which direction it is going, and whether the trend is starting or ending.  Because the going can be tough especially in a financial crisis, you can’t expect a chart to always be smooth and upward in trend.  It can get sloppy and erratic at times, and that’s when reading charts becomes handy.

Levels of support and resistance
Over a short period of time, a stock develops a level of support as well as a level of resistance.  The former is a price at which a stock doesn’t drop down or fall below, while the latter is a price which a stock can’t penetrate through or break beyond.  For such a stalemate, it takes a very significant financial event to make either downfalls or breakthroughs in prices.  That’s what you have to watch for.

Price history, support and resistance
It would be safe to go back 6 -12 months in the past and retrace how stock prices have held up consistently.  For example, if a stock fell a number of times to $30 USD in the last six months and kept rising from that same price repeatedly, then you have a reasonable history of $30 USD as its price support.  On the other hand, price resistance is the price at which a stock cannot seem to rise past as shown by a given number of tries.  If a stock always fell back when it reached $40 USD, then that is its price resistance.

So how do these basis technical terms apply in real life?  The bottomline is they tell you HOW to buy stocks and WHEN to buy and sell stocks.  For example, you can place an order to buy stocks when they cross a level of resistance because a newer, higher one will be set and you are bound to profit from it.  When you anticipate that a stock is just holding precariously above a level of support and could fall below it anytime, then that would be the perfect time to sell before you incur losses.

So how do you get better at reading charts when you’re such a beginner?  Some people fast-track their stock market education through quick online courses in stock trading. Some strive to learn by listening attentively to the best and brightest among their peers. Still some continue to grow by reading the news and correlating the information they gather with what the charts, indeed, have to show.

For more tips and information about how to read stock charts, please check out: www.tradestocksamerica.com