Being able to read a stock chart is an essential skill for anyone wishing to learn option trading. Charts can be
interpreted to give an indication of which direction a stock may be headed.
The most commonly used chart is the line chart, which is based on the stock's closing price for the day. The line
chart is most effective when viewing a chart's historical prices.
Candlestick charts, a format developed long ago in Japan, are a better source for interpreting the
day's events. Candlesticks have a body; they can vary in shape depending on the range of prices traded by the stock.
A black candlestick denotes a bearish day. A white, or open candlestick, denotes a bullish day. Candlesticks show
the range in which the stock traded during the day.
Extreme Charts and Simutrade Manager, a tool created by BetterTrades, is the ultimate charting
program. Users can monitor a stock's daily performance, set up filters to find specific stocks, produce scans that
find stocks meeting certain criteria, and draw trend lines that remain in place until removed by the user.
One source of free charts, courtesy of BetterTrades, can be found at charts.bettertrades.com. These can be adjusted
for line or candlestick charts and can be scanned for indicators like Moving Averages and Bollinger Bands.
Many sites, like msn.com and yahoo.com, will offer ways to call up a stock's chart and check it's historical selling points.