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There are different types of charts to read and understand when investing in the stock market. Some have names you will be familiar with such as a bar or line chart; others will have names that will make you look twice. Have you ever heard of a candlestick chart? Strange name but a stock chart worth reading, just the same.

Stock charts tell investors about market behavior. They don’t foretell the future but give a good history of what’s been happening. Learning from history can sometimes help in working out what the market is going to do next.

The Line chart is the simplest of all stock charts. It shows a line connecting across the graph at various points. These points are the stock prices at various times. Line charts can be a daily analysis or over longer time periods.

The Bar chart is one that you probably used at school. For gathering information about the stock market movement, the bar chart will tell you more than the line chart. You will find detail about what’s happening with the stock price. A ‘cross hair’ depicts the price and how it has moved on this chart. The vertical line of the bar reveals the stock’s range over a time period, which can be any small time amount during a single day, or covering many days performance over a month. The ‘hash mark’ in the horizontal position shows the stock’s close point for the day. A bar chart can also be referred to as an Open-High-Low-Close (OHLC) chart and there are two distinct types of bar charts you may come across. The simple one, as described above, and then the one with the funny name.

A Candlestick chart is similar to the simple bar chart, but you will see an extra bar, a long thin one, (representing the wick of a candle). And this bar is encased by a shorter, fatter bar. The wick is doing the same job as the plain bar chart – it shows the high and low of the stock. The shorter bar provides the open and close information, but here you have to take note of the integrity of the bar. If the bar is hollow (not filled in), this indicates the open price of the stock was less than the close price (a good thing!). In the bar that is a solid color the opposite happened – the close price was lower than the open price. In the first instance (hollow bar), the bottom is where the stock opened and top is where it closed. In the second, solid bar, case, this is the reverse – the open price of the stock is at the top of the bar, whereas the closing price is depicted at the base. The bottom of every chart is the volume. This gives you an indication of how much strength is behind the movement of the stock.

The good thing about stock charts is that they are objective. They show exactly what has happened with no emotions or opinions thrown in. As an investor you should follow a range of charts, over differing time periods (i.e. daily charts, weekly charts, monthly charts). If you keep an eye on the charts you will be able to recognize when a particular stock is doing well, very well even. Imagine how great you’ll feel if you spot the company whose prices have shown a jump way above their usual? If you pick up on a breakout high you can act on it.

Stock charts are also going to be helpful when you want to sell. Watching the charts will give you early warning signs. If your charts tell you that stocks are being sold in large volume over a period of days, the alarm bells should be ringing in your head. It’s time to start selling before the company’s stocks crash.