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How to read a stock chart

To put it simply, a stock chart is a numerical chart that helps readers understand how a stock is trading. It provides the reader with the stock name, trading symbol, price, and other data. With this data, investors determine whether a stock should be bought or sold. It also aids the investor in calculating the financial return if they choose to sell a stock.

What's in a stock chart?

Source: Google.com

The look of a stock table

Stock tables have a standard look about them. To dissect the stock table, take a look at the top line first. This is where you will find the name of the stock (in this case, Apple) and its ticker symbol (AAPL). The ticker will be the same no matter what investment tool you are reading.

A quick look inside the table

Once you get into the body of the stock table, you will find the most important data about the performance of the stock. You’ll see a graph with two lines – showing the price trends over a selected period of time. Above, you will see 

Here, It’s divided into two columns. The left column includes the open, high, low, market capitalization, and price to earnings ratio. The right column includes the dividend yield, previous close, 52 week-high, and 52-week low. This table is meant to provide a total picture of the stock, how it is doing, how it has done, and what can be expected over the next few months. More on the definitions in a bit. 

What this all means

Now that you know what you’re looking at, here’s what each component and phrase means.

Ticker and market

Knowing what is on the stock table is only a small piece of the puzzle. The important piece to the puzzle is understanding how to use it. The name and ticker symbol and market are the easiest to explain. This is how you identify the company on and off the market. In this case, the AAPL is the ticker, which is traded on NASDAQ. 

The price & price graph

The current trading price is listed in large black letters. On this chart, Apple is currently trading at $201.11. The (+10.93) (5.74%) listed to the right of the price indicate the dollar change and percent change since the previous day’s closing price, which was $190.29. You can see the previous days price on the green price line.

The price graph shows the price trends over time, depending on what you click. For this chart, you can choose between looking at 1 day, 5 day, 1 month, 1 year, 5 year, and max (lifetime) price trends. This will help you see if the stock is trending up or down, and at what rate.

Other components

The rest is just a matter of knowing the acronyms and definitions of the investing jargon. Once you have these memorized, you’ll be able to understand any stock chart.

  • Open: Opening price. The price the stock started trading at when the exchange opened. In this example, $199.13.
  • High: The highest price the stock has seen that day. In this example, $201.32.
  • Low: The lowest price the stock has seen that day.  In this example, $197.31.
  • Mkt cap: Market capitalization.  The number of outstanding shares multiplied by the stock’s current price. Usually, this is used to measure the value of a company. Usually, the larger the number, the higher the value and stability of the company. In this example, 986.80 billion.
  • P/E ratio: Price to earnings ratio. The stock’s price divided by the earnings per share. In most cases, the higher the P/E ratio, the better for the investor. In this case, it’s 17.45.
  • Div yield: Dividend yield. The dividend per share; it’s annual dividend payments divided by its market cap. In this example, it is 1.45%.
  • Prev close: Previous close. The stock price at the last close of the market. In this example, it’s $190.92.
  • 52-wk high: 52 week high. The stock’s highest traded price over the last year. In this example, $201.32.
  • 52-wk low: 52 week low. the stock’s lowest trade price over the last year. In this example, $148.41.

Final thoughts

Knowing how to read a stock chart, and compare it to other charts, will help you determine if a stock is worthwhile. The combined information of the stock table allows you, as the investor, to make an educated choice as to whether to buy, sell, or ignore a stock.