Welcome to the introduction to charting. The intent of this section is take someone who is unfamiliar with charting and introduce them to some of the basic concepts and terms that are used.
To begin with, charting is where you look at a visual representation of what has already happened with the price of a stock over a period of time. And then to look at this history to find patterns that reoccur over and over to give you an idea of what is likely to happen in the future.
The biggest part of the chart is the price and time. The INTERVAL is how much time is shown by each mark on the chart. A weekly chart is where each tick (candlestick or bar) represents one week of trading. The normal is the calendar week of Mon. thru Fri. A daily chart shows one whole day for each tick. For intraday charts I normally use the 60min and 15min charts. It will depend on what charting package you use as to how much history is shown for each time frame. Some charting packages are a set amount of history, and others it is variable depending on the size of the ticks and the size of the chart. Normally for a weekly chart you need to see a years worth of trading. 3 months of history for a daily chart. For the intraday charts you will need to see between 1 to 5 days of history.
I prefer to use CANDLESTICKS (candles) to show what the price does for each interval that is on the chart. What I like about candles is that they give you a lot of information at just a glance. The candlestick has a body and shadows. The body is made up of the area from the open to the close. Once again, it will depend on the charting package that you are using as to what the body of the candle looks like. If the close is above the open, then the candle will have a box outline of the body, and will be "hollow". If the close is below the open, then the body will be filed in, it will be solid. With the charts that I use, I can customize the appearance of the candle, and I have set it to show the body in GREEN if the close is above the open, and in RED if the close is below the open. So at a glance, by the color I can see if the price moved up or down for that particular candle. The shadow is the line that shows what the high and low of that period were.
There are many different SHAPES that the candles can form, along with many different patterns. These different shapes and patterns have unique names to describe them, like doji, hammer, morning star, etc.... These shapes and patterns do have meaning, and when you understand the psychology of why the shape formed, then you quickly understand how they can help give you an idea of what is likely to come next.
The price itself also tells a story. There will be trend lines where the price just moves in one direction in an orderly manner and there will be movements that have specific meaning like a breakout or breakdown, and specific PATTERNS that have meaning like a Head & Shoulders, Cup & Handle, double top, and double bottom to name a few. Also the price will form resistance areas where there is more selling pressure than buying pressure, and this prevents the price from rising any higher, and support areas where buying outweighs selling and prevents the price from falling any further.
Here are some of the terms / abbreviations that I use.