intermediate
8 min read

How to Read a Stock Chart

Understand price, volume, moving averages, and key patterns. A practical guide for analyzing stock charts.

The Basics

A stock chart shows price over time. The vertical axis = price; horizontal axis = time. Candlesticks show open, high, low, close: green = close > open; red = close < open.

Volume

Volume is the number of shares traded. High volume often confirms trends—a price move on low volume may be less meaningful. Look for volume spikes on breakout days.

Moving Averages

  • 50-day SMA: Short-term trend. Price above = potential uptrend.
  • 200-day SMA: Long-term trend. "Golden cross" (50 above 200) is a bullish signal to some.
  • EMA weights recent prices more than SMA.

Support and Resistance

  • Support: Price level where buying tends to appear. Stock "bounces" off it.
  • Resistance: Level where selling tends to appear. Hard to break through.

For Long-Term Investors

If you hold for 10+ years, daily chart patterns matter less. Focus on fundamentals: earnings growth, valuation (P/E), competitive advantage. Charts are one tool—not a crystal ball.

Frequently Asked Questions

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How to Read a Stock Chart | Investors Lab | Investors Lab