There are many types of charts a person can use. The two most common are called bar charts and candle stick charts.

Bar charts typically show the open, high, low and close of a certain period. Lets take a look at a daily bar chart on August 24th below. Ive blown this chart up to where it covers three days worth of data. In a daily chart, this shows the daily opening price to the left; the high at the top; the low at the bottom and the close to the right. This is the main type of bar chart. There are other types that exclude the opening price, etc but the one below is the one most commonly used.



The next type of chart is called a Candlestick chart. This type of chart was brought over from Asia. The Japanese used this quite commonly. They measure the same information that a bar chart does except it makes it more visual and has patterns that come out of it that some believe predict future actions. Some of these patterns are: hammers, shooting stars, evening stars, etc. That topic is so broad that a course could be developed out of it by itself.

Candlestick software providers can make down candles or up candles many different colors. The most common is for a down candle (where it closes lower than it opened) to be red. An upward candle (where it closes higher than it opened) could be green. A candle that closes similarly to where it opened might be colored white. These patterns are sometimes referred to as dojis or spinning tops. They tend to connote indecision and a lack of momentum.



Trending or Range Bound? Stocks tend to either be trending upward or trending lower or they get stuck in a range. Lets take a look and see what this looks like on a chart.

Below youll see a stock that was downward trending (red). Then it consolidated into a sideways range (yellow) and then turned upward into an upward trend (green). Notice that a downtrend consists of lower lows and lower highs. Many times one can even draw a down trend line by connecting the tops / highs.

A sideways range consists of highs and lows that are not noticeably going ever higher or lower consistently. This is when prices tend to get stuck in a range of consolidation. Buyers and sellers are almost equal or canceling each other out. This typically happens when the crowds are starting to change their opinion as a whole on the stock. However, its like a slow turning ship. It takes time to turn around. This is what the sideways consolidation period is all about.

Then you have the up trend. An up trend consists of ever higher highs and higher lows. Many times one can draw an up trend line by connecting the major low points together.



That is one of the most important factors in technical analysis. You want to see where the momentum is heading. Is it upward, downward or consolidating sideways? This will tell a trader quite a bit, even before learning how to use the first indictor. After all, who wants to buy a stock that is going ever lower? Wait for a period of consolidation or a break upward higher. One might want to sell a stock once an upward trend line is broken or a series of lower highs and lower lows start to occur. These are all signs that the upward momentum is dying off or has even changed.