Share and Stock Charts

Markets operate in future time which means that traders and investors tend to “price in” their expectations about how a particular news or economic event will affect the market. This often leads to the share market reacting contrary to what the news release might imply once it comes out. This is because once the actual news or economic event is released there is nothing on the immediate horizon for traders and investors to price in, therefore, the event is over before it begins, so to speak. This is not to say that fundamental analysis is not important, it is absolutely crucial to have a good understand of the basic business fundamentals driving the growth, or lack of growth, behind the companies you are interested in investing in.

It is crucial that you understand that value of using share price charts when trading or investing in the Australian share market. While understanding the fundamental picture is certainly important when making share trading decisions, you also need to learn the basics of technical analysis and make sure that you always consult the charts before making any significant trading decisions. Share charts are a visual representation of the supply and demand situation and overall bullish or bearish sentiment of any given share you are interested in. Check our shares commentary for examples of how to effectively utilize share price charts in your investment and trading decisions.

Share charts should be used to gain an objective view of the markets that is not biased by human emotion. They should be thought about as a way to filter out human bias, often times when the media and various stock analysts are getting overly-excited about a specific share to invest in, there will be a major technical reversal signal at about the same time that you would only have caught from analyzing the charts. Finding the right inter-play between fundamental and technical analysis is a task that all beginning share traders must accomplish. Check out our shares education page for more information on fundamental and technical analysis.

Below are images of line and candlestick share charts of NAB – National Australia Bank. The green bars at the bottom of the chart are volume indicators; these can be used to show the daily turnover for any given share.

Here is a list of a few links to some good free charting resources:

http://hfgapps.hubb.com/asxtools/Charts.aspx

http://bigcharts.marketwatch.com/

http://stockcharts.com/charts/

http://www.incrediblecharts.com/

Share charts can very often tip you off to the best shares to buy. Many people that prefer to let other people manage their investments make a crucial mistake by not looking at charts of the companies they are invested in. Even if you choose to let a financial planner or similar professional manage your investments, make sure you know how to read a share chart and understand the basics of price action. Often, people who manage funds tend to have so many clients they simply do not have time to effectively analyze the technical picture for each share their clients are invested in, and some very important mid to longer term price movement signals will go undetected. Take a proactive role in your investments by learning how to read a price chart and you will greatly increase your skill at timing entries and exits for all your share trades and investments.