The ability to read stock charts is a fundamental skill you need to acquire to trade the stock market.
Often, many beginners view this as too big of an obstacle to their success in trading.
It does not have to be that way.
In this tutorial, I will show a step by step process on how to read stock charts as a beginner and thus be well on you way to better under the stock market.
Table of Contents
How To Read Stock Chart For Beginners | What Is It ?
Since you are reading this tutorial on how to read stock chart for beginners, chances are you have had a limited experience doing it.
Rest assured, many traders out there have still not mastered this essential skill.
How do I know ?
Firstly, I started like you at the beginning of my trading journey.
Secondly, When I visit stock forums, I see many requests from beginners traders asking more experienced ones about their analysis of specific stocks.
I myself have been providing such stock charts analysis in my Live Day Trading YouTube channel often called options trading for beginners.
Is Reading Stock charts Easy ?
A few years ago when I was started my trading journey, I did not know how to read a stock chart.
I would say I am more than an average student.
At the time, I could only witness other traders do it so effortlessly.
Then I put in a time, the effort and passion.
Now here we are : I am about to take you through the path I have taken to master stock charts reading.
If I have done it, I sincerely think you can do it too.
In fact, compared to other skills you have acquired so far in your life, I would not rank reading a stock chart as the most difficult one.
In order to put you mind at ease in this endeavour, how about this simple fact.
Once you know how to read one stock chart, you will be able to read them all.
By that I mean that the knowledge is not different per stock.
A lot like when one knows how to drive, the car model does not make any big difference.
Is Stock Chart Reading Reliable ?
The art of reading stock charts is called technical analysis.
There are those who consider it full rubbish and those who cannot live without it.
Before we dive into the knots and bolts of stock charts reading, let’s tackle on the one question you may still be on the fence with.
That is the stock chart reading really reliable ?
Many still thinks that either the market is completely random and thus cannot be read, analyzed or predicted.
There is no denying thee market can be quite noisy with many contradicting signals.
However, one can definitely decipher trends despite this noise.
We know there are powerful AI Algorithms out there capable of filtering such noise.
But even regular human beings like you and I can certainly reach a level of expertise to achieve that same goal.
How Long does it Take to Learn How to read stock charts ?
The time it will take you depends on your level of effort.
I have been coaching this new trader now for less than 1 full month.
His name is Mr. Ocean.
He has committed himself to two weekly coaching session Live on zoom with me.
We were analyzing BYND stock chart earlier today.
A bullish run that start May 25 from 106 to $153 on May 28 as depicted on the graph below.
Mr. Ocean asked that could we see on the May 25 that the momentum of BYND stock has turned bullish.
All this to show you that Mr Ocean has had its Aha moment with stock chart analysis.
It took him about two months to go from beginner trader to this level.
Why Is Reading Stock Charts Important For Beginners ?
In keeping with the analogy of car driving from earlier, imaging trying to drive a car on the road without knowing the rules.
You can think of stock chart reading as the set of rules to help you in your trading or investing.
Of course, these are not hard set rules like the ones you learned in driving school.
However, they are important enough for you and I to know so that we can establish a solid foundation to our trading.
Getting A Solid Foundation For Trading
Without this knowledge, you will be unable to determine when a stock is likely to go up or down.
Whereas this skill will bring you the extra edge and needed confidence to take trades other may not even yet envision.
You do not want to built your trading career on getting fed trades by others.
Just because you did not realize the power the knowledge of stock charts reading would bring you.
Reading The Stock Markets
For those traders in other markets than stocks, guess what ?
You will be able to use the same skills for Forex, commodities , cryptocurrencies, interest rates.
Whatever is chartable or can be put on a graph is something you can analyze with this skill.
Understanding Stock Charts
The primary goal in understanding stock charts is to translate that knowledge into making money.
You can either trade the stock or one of its popular derivative: stock option.
That is what I specialize in and teach many other traders.
Here is an example of how I used my understanding of stock charts to make money trading options.
How To Master Reading Stock Charts
I am not sure what type of student you are.
But as for me, when I commit to learning a skill, I do not rest until I have achieved mastery level.
There is this saying I used to hear taken from a sport analogy.
Amateurs do it until they get it right while professionals do it until they cannot get it wrong.
The nuance is subtle enough I hope.
The Tools You Need to read Stock Charts
With that aim in mind, all the tools i am about to unveil are certain to get you to that goal.
How can I be so sure ?
Because they did it for me and the many traders I am currently coaching on how to read stock charts.
This activity has the first course on our On-boarding series of classes for beginner traders at Successfultradings.
Which are the best sites to do technical analysis for stock trading
During my many years of trading the stock market, I have always used the following two sites for technical analysis.
First there is Finviz which comes with a plethora of features for both fundamental and technical analysis.
It is a must have if you are serious about stock trading in general and more importantly day trading as we will reveal in the next section.
What makes Finviz a tool of reference for technical analysis is its ease of use.
Our Finviz.com review will guide you through step by step setup of the multiple scanners you can employ.
Free stock charts
Tradingview is the other free site to where you can learn how to read stock charts.
any technical indicator you can think of, someone has most likely shared it before on this platform.
You see, Tradingview has a very strong communities of traders not only for stock trading but all markets spanning from currencies, crypto, commodities, indices, futures and bonds.
Just like its counterpart Finviz, TradingView comes with a free version that is enough to get any beginner rolling on stock chart analysis.
You will need to set it up with the basic three indicators as described in this short video.
How I Use Baha App | Formerly Teletrader
Baha App exists for both Android and iOs even though the functionalities may be slightly different.
I have ben using the Android version for several years now.
This is my most convenient way to read stock charts especially on the Go.
Whether I am waiting in line at a grocery store ( yeah, that happen a lot in 2020 and 2021 Pandemic times) or at a doctor office, I can quickly pull out this App and start analyzing stock graphs.
How To Access the Chart View on Baha App ?
The first thing you will do after downloading the free Baha App on your device is to create watchlsits.
I have set up my Watchlist per economic sectors.
For instance , here are some of my Watchlists with the corresponding stocks.
- Banks | MS, WFC, GS, C, BAC, JPM, XLF
- Bio Pharma | Amgen, MDT, Moderna, ABBV, BHC, GILD, JNJ, Pfizer , Teva, Biogen
- Oil and Energy | Vale, FCX, MPC, OXY, HAL, XOP, HESS, MOS, LNG, WPC, COP, CVX, XOM
I usually include the corresponding ETFs for the sector as well like XOP for the Oil and Energy.
Why you may wonder ?
Because it is of a great help in learning how to recognize stock chart patterns.
Stocks in a given sector usually have similar trends.
Performance View Vs. Chart View in Baha App
Therefore by going through a watchlist you will get a chance to see whatever pattern they may have multiple times.
That is my secret routine I used to master stock charts patterns.
Spending time analyzing stock charts is the best advice I can give you on this.
There is not a better way to analyze stock graphs than with BAHA app.
The above view shows you how to easily switch from the Performance view to the stock chart view.
The three ittle dots circled in pink do not exist on the iOs version.
Instead click on the Eye icon just below the “Edit pencil” icon.
A menu wil lshow up eactly as shown and select Chart view to obtain the view on the right.
From there you can select any stock chart and begin your analysis.
I have created a full in depth video on how to setup the BAHA App on my YouTube channel Successfultradings.
Three Easy Indicators To read Stock Charts
In my attempt to keep things simple and to the point for beginner traders, we have selected three indicators you must have on your charts or graphs.
- Bollinger Bands
- Volume weighted Average Price known as VWAP
- Exponential Moving Average or EMA
I use both the EMA8 and EMA20 as part of the Pro version of Tradingview.
The reason for that is that EMA8 provide the most recent momentum and EMA20 is treated as a long term momentum.
When EMA8 crosses below or above EMA20, that is a strong conviction of the immediate future direction.
A cross below is bearish and a cross above is bullish.
Other Basic Indicators
The next key indicator you can learn about are volume obviously.
This recent article on Volume analysis on webull details its importance in stock charts reading.
I do not have a trading strategy strictly based on volume right now but that may be coming in the near future.
Earlier, we introduced the EMAs.
I want you to think of them along with upper and lower Bollinger bands as natural support and resistance.
Support and resistance can also be identified through reading the stock graph on the past behavior of the stock at a given price.
Here is our full detailed video to help you understand what support and resistance are in stock trading.
More importantly, you will learn how to use support and resistance to make money trading.
Reading The Stock Market Creates Lifestyle Opportunities
By now, I hope you are beginning to see all the benefits of mastering how to read stock charts.
Next I will introduce some insights in reading the stock market .
How To read Stock Chart for Day Trading
When it comes to day trading, all the same indicators are still valid.
The only thing that traders usually modify is the timeframe.
It is usually referred to as the frequency of the chart.
The choice range from 1 minute to 1 month.
Day traders often settle for 3, 5 or 15 minutes interval.
The difference is that the charts may show a great deal of noise in lower timeframes.
I prefer to use 15-minute frequency because it enables me to avoid false positive.
Since I use Tradingview during day trading, I am able to use a split-screen with 5 minute on one side 15-minte interval on the other side.
I created this video below to help traders with trend identification for day trading using VWAP indicator.
It is worth to mention that there is the reciprocal video for bearish trend trading as well.
Which one of the two video do you think has the most views on my YouTube channel ?
Read Stock Charts Patterns
As your confidence in reading stock charts grow, your next step will be to be able to analyze stock patterns.
Stock are visible on charts for trained eyes.
Why do they happen so often ?
Because most of the volume ( over 65%) traded in nowadays stocks is generated by computers.
Here are some of the most effective Stock chart patterns I have come accross.
U, V, W are pattern you will learnt o recognize on daily and weekly charts mostly.
Here is one such example of the daily chart of BYND stock.
From Upper Bollinger to Lower Bollinger
A trader once told me that he was researching AMD traders and found our Discord Channel.
Later on, he told me that he specialize in day trading AMD from lower Bollinger band to upper Bollinger band and vice versa.
That is a strategy right there for you to test and add to your repertoire.
This trader told me that his goal was to get 20% profit in this strategy.
Is that good enough for you ?
I can confirm the Bollinger band strategy as I recently make money on VUZI daily stock.
I was able to recognize the pattern in the yellow circles above.
I setup some puts when the stock hit resistance on the upper Bollinger bands.
within a couple of days (VUZI only has monthly options), the stock started moving down as it has done 5 times on the above view.
Reading Chart Patterns Led Me to Life Changing Opportunity
I was able to take my knowledge about reading stock charts and turn it into a successful strategy.
Back in 2017, once I became really confident about stock chart patterns, i came across a famous one.
I created a computer code for it and I have been trading it ever since.
The result are just amazing over the short and semi long term.
We used this as one of the strategies in the Successful Tradings 10-baggers trading system.
Below is a snapshot view of our weekly results measured by average move per stock.
In this How to read Stock chart for beginners tutorial, I hared how important this skill can be for you as it was for me.
Then we took you through the steps you need to become fully comfortable with reading the stock market.
As you continue your progress, I strongly suggest you complement your know by joining our 10-Baggers Trading Education System to take your Trading to the NExt Level.