Stock Charts For Dummies

Greg Schnell, Lita Epstein

• Publisher: For Dummies
• Year: 2018
• ISBN:
  9781119434443
• Edition: 1
• Topic: Business
• Subtopic: Stocks
• Index: Business

The easy way to get started in stock charts

Many trading and technical analysis books focus on how to use charts to make stock trading decisions, but what about how to actually build a chart? Stock Charts For Dummies reveals the important stories charts tell, and how different parameters can impact what you see on the screen. This book will explain some of the most powerful display settings that help traders understand the information in a chart to find outperformance as its beginning.

Stock Charts for Dummies will teach you how to build a visually appealing chart and add tools based on the type of trading or investing decision you're trying to make. It will also introduce you to the pros, cons, and best practices of using three key types of charts: Candlesticks, Bar Charts, and Line Charts.

• Build and use technical chart patterns
• Increase profits and minimize risk
• Track and identify specific trends within charts

A unique guide for beginning traders and investors, Stock Charts for Dummies will help you make sense of stock charts.

Part 1

Getting Started with Stock Charts

IN THIS PART …

Begin with the basics of building your stock charts.

Use charting to minimize your emotional response to the ups and downs of the market.

Chapter 1

Brushing Up on Stock Charting Basics

IN THIS CHAPTER

Keeping your emotions in check as you invest

Getting different views of charting

Making decisions with charting tools

Organizing and managing trends for your stocks

Tweaking your personal stock charts

You can find hundreds of books talking about technical analysis and stock charting, but if you don’t build your stock charts properly to do that analysis, you could end up getting the wrong information. In this book we introduce you to the various types of stock charts out there, as well as the tools you can use to make these charts work even better for you when you’re trying to make stock buying and selling decisions. This chapter gives you the basics.

Minimizing the Emotional Roller Coaster of Investing

Before you even start working with charts, it’s important to understand how your emotions can help make good and bad stock purchase and sale decisions. In Chapter 2, we discuss the key emotional drivers of stock trading decisions and what economic forces drive those decisions (such as changes within a company and the effect of institutional investors). We also explain how building charts can help you track stock price changes and control emotions, and we provide some fundamentals on index charts and trends.

Getting a better understanding of your own emotional reactions to these key factors that can impact the movement of stocks can help you make better business decisions based on facts rather than emotions.

Viewing Stocks from Varying Perspectives

Not all charts look the same or are meant to give you the same information. In Part 2 we introduce you to the key types of charts — candlestick charts, bar charts, line charts, and area charts. We show you how to build these charts using tools on StockCharts.com (www.StockCharts.com). Click the green button on the home page that says, “Free 1-Month Trial,” and you’ll have one month to try out the members-only sections of www.StockCharts.com for free.

All chartists should know how to build these critical chart types:

• Candlestick charts: These charts give you a detailed view of key stock information daily: open, high, low, and close.
• Bar charts: These charts give you less detail than a candlestick chart does — only the opening price and the closing price — but they can be easier to read than candlestick charts.
• Line charts: These charts show you the stock price trend with a simple line, which makes it easier to view a stock’s trend over a long period of time.
• Area charts: These charts show you the same information as a line chart, but they can be more dramatic because the area below the line is a solid color. They are most commonly found on TV financial news.

Discovering All the Tools You Can Use with Your Charts

As you become more familiar with the types of charts, you’ll find out that many variables can make the chart look different and offer you different information. Some of the key variables include

• Time frames: In Chapter 8 we discuss the critical time periods you can set for various types of decision making and how each of these time frames impacts the information you see on the chart. Choosing the wrong time frame for the decision you’re trying to make could lead to a bad decision.
• Using a price chart: With the proper tools, a price chart can help you determine the trends in the stock market. In Chapter 9, we show you how to spot uptrends and downtrends in a stock price, help you determine volatility and its impact on price, and give you suggestions about what to do if a stock isn’t trending. We also talk about the various types of bases you may find in a stock chart and how these bases can impact your decision making. You’ll also find information about determining whether a stock price is likely to start falling.
• Using overlays: Overlays are powerful tools that make it easier for you to read a stock chart. We don’t introduce every type of overlay, just the ones that are good for beginning chartists to use. In Chapter 10, we introduce you to some handy overlays to help you get started. One of the most common is moving averages. Actually, you can find overlays for many types of moving averages. We introduce the key ones and explain the information they can show when they are used. We also introduce Keltner channels and Bollinger Bands.
• Using indicators: Indicators are another type of tool you can add to a chart. There are many types of indicators; we introduce you to the best ones for beginners in Chapters 11 and 12. You find momentum indicators and how to use them, as well as various types of indicators to determine the strength of a stock.

Getting Organized with Your Charts

After you’re familiar with the various types of charts and tools available, it’s time for you to start organizing how the charts can help you with your stock investing or trading decisions. Check out the following:

• In Chapter 13, we introduce you to the power of organizing your choices by industry groups and/or sectors. This task enables you to improve your stock picking.
• We show you how to keep track of what’s going on with your stocks in Chapter 14. This task lets you better manage your stock portfolio.
• Chapter 15 focuses on various types of indexes you can use in your charts to help you compare your stocks to the broader market. This task enables you to better analyze how your portfolio is doing versus the broader market.
• Chapter 16 gives you strategies for doing a weekly check of the stocks you’re holding or watching. This task helps you more efficiently track your portfolio.

Customizing Your Charts

After you have a good handle on what tools you like to use consistently for various types of decisions you need to make, you’ll want to save these various chart styles to make it easier to use them again and again. In Part 5, we show you how to customize your charts and save the ones you like. You find out how to personalize your charts by seeing how various combinations of indicators and overlays can help support your personal trading style.

Putting Everything Together

Ultimately, it’s time to take everything you’ve learned and put it all together to help you make better buying and selling decisions. We discuss some strategies in Part 6 that help you use your charts to gauge the market’s direction as well as identify leading sectors and the best stocks in those sectors. You can use these techniques to narrow your focus to the sectors in which you want to invest or trade. We also show you how to build your charts to more effectively use these tools in order to improve your investing or trading results.

We can’t guarantee that you’ll always sell stock for a profit, but we do believe using the tools we show you in this book will help you improve your buy and sell decisions. You find tips for ...