Kinds of Charts

● Parts of Charts

Click to Enlarge. Chart courtesy of StockCharts.com

Fig 1.1 above is a stock chart in its simplest form. This section will go over each part to ensure understanding.

In the upper left corner is the name of the company, Minnesota Mining & Manufacturing Corp, with its ticker symbol (MMM) and the exchange it’s traded on, the NYSE. [Hint: Depending on the charting software, the location and appearance of information can slightly vary.]

Price Movement:  The stock prices for MMM are represented with a red and black line. Each point on the line corresponds to a closing price on the right vertical axis. Red coloring is used when the stock price goes down; black coloring is used when the stock price goes up.  (Please note-- chartists almost never use a plain line to represent the stock prices. We are only using a line chart at first to keep things simple. Later chapters explain other types of stock charts.)

Timeframe:  In the upper left corner is the timeframe. This is extremely important. In this case, the chart is a weekly chart, marked by “weekly” next to the MMM ticker. Therefore, each point on the line represents one week’s closing price, i.e., where the stock closed at the end of the day on Friday or whatever day the week trading ended.  Stock charts can be in any timeframe. For example, if we wanted a shorter timeframe of the above chart, we could change it to daily, making each point on the line a daily closing price instead of a weekly closing price.

 
Fig 1.2

Price Details:  Right below the MMM stock ticker symbol are the details about price which have been enlarged in Fig. 1.2. (Looking at these is easier than taking a ruler to the chart to figure exact numbers)

First there’s the date, then there’s the opening price (O), the high price (H), the low price (L), the closing price (C), the volume (V), and the Change (Chg). These details normally apply to any point on the chart that you click on.  For this handbook, though, most prices will describe the last point, or farthest right, on the chart.
  
Open (O) means the opening price for whatever timeframe you’re using. In Fig 1.1, because it’s a weekly chart, open means the stock’s opening price at the start of the week. For the last week on the chart, the opening price was $79. (Notice that although the stock opened for the week at $79, the line never goes as low as $79.  Why? That’s because in line stock charts, only the close is plotted, meaning any movement lower or higher than the close won’t be shown...that’s the problem with line charts.)

 
 Fig 1.2

Low (L) means the lowest price during whatever timeframe you are using.

Close (C) means the close of whatever timeframe you are using. For the above chart, close means at the end of the last week, MMM finished at $85.88.

Volume (V) means the total volume during your set timeframe. Using the above example, during the last week on the chart, 10 million shares of MMM traded.

Change (Chg) means the change from the last close to the one before it. From the close of the last week, to this week’s close, MMM gained $4.38.

● Which Chart Timeframe to Pick?

How do you decide among daily charts, weekly charts or monthly charts? The answer is that it depends on what you’re trying to do. If you are planning on holding a stock for a few days, then you should use a daily stock chart; a few weeks, a weekly chart, etc. It is helpful, however, to have the bigger picture in mind even if you plan on trading short term so you don’t get tunnel vision. Try to look at several timeframes when learning technical analysis.