A stock chart is a graph that provides a visual representation of a stock’s price movement over a specific period of time. Stock charts usually consist of X and Y axis lines, with the former representing the time period while the latter representing the price movement.
Charts are seen as a crucial tool for technical analysts. Their main aim is to visualize the price action. This data is then used to extract patterns and signals that can be used for future trading.
The historical stock performance is analyzed to extract support and resistance levels, trends, trend lines, moving averages, etc. Traders can apply different time intervals on a stock chart - typically from 1 minute to 1 month.
Indicators are applied to help identify trends and signals. There are two main groups of indicators: leading and lagging. The former projects future stock price movements while the latter analyzes historical trends.
Key chart indicators are: Simple Moving Averages (SMA), Exponential Moving Average (EMA), Stochastic, Moving Average Convergence Divergence (MACD), Bollinger Bands, Relative Strength Index (RSI), Fibonacci retracement and extension lines, Ichimoku cloud, Standard Deviation, Average directional index, etc.
Expert advice is that technical analysis should always be paired with sound risk management tools to yield profitable returns.
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