Tips for Stock Charts That Enhance Your Analysis

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Tips for Stock Charts That Enhance Your Analysis

Charts serve as a technical trader’s window into the markets. With so many advancements in analytical systems, traders may now access a vast array of market data. However, with so much data accessible, it’s critical to build well-designed charts that will aid, rather than impede, your market study. The sooner you can analyze market data, the quicker you can respond to shifting situations.

Taking the effort to create tidy, easy-to-read charts and workspaces will help you increase your situational awareness and ability to analyze market activity. Continue reading to learn how to create the greatest stock charts imaginable.

Key Takeaways

  • Technical traders evaluate market data using a range of stock charts to determine the best entry and exit points for their trades.
  • By organizing your charts and workspaces, you’ll have rapid access to the information you need to make smart trading choices.
  • Colors, typefaces, style, indicators, and overlays should all be carefully chosen to produce a well-designed stock chart.
  • Traders will commonly utilize several monitors, one for order input and one for charting and market research tools.

Chart Colors

While experimenting with various chart colors may be enjoyable, and many chart analysis tools provide literally hundreds of color options, keep in mind that you will be spending a lot of time staring at the chart. Colors that are simple to see are essential. Individual colors on the chart must not only be aesthetically appealing, but they must also work together to form a well-contrasted chart.

Background Colors

In general, chart backgrounds should be confined to neutral hues such as white, gray, and black. Bright or fluorescent hues might become uncomfortable over time and make chart indications difficult to perceive.

You may fine-tune the remainder of the chart once you’ve chosen a suitable, neutral backdrop color. Colors for grid lines, axes, and pricing will need to be chosen. Again, it’s best to keep them in a neutral color that contrasts with the chart backdrop. An easy-to-read chart, for example, has a light gray backdrop with a black or dark gray grid, axes, and pricing components.

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Price Bar and Indicator Colors

Price bars and indicators may be added to your chart, and their colors should stand out from the backdrop. After all, this is what you’re actually interested in. Red (for down bars) and green (for up bars) price bars will stand out against any of the neutral backdrop hues. Furthermore, most analysis systems provide a selection of red and green hues to pick from to improve visibility. Black (for down bars) and white (for up bars) price bars show out extremely well against a gray backdrop. Indicators should be in contrasting colors to make any data visible and easy to read.

Special Color Considerations

Another thing to think about is utilizing various colors for charts that perform distinct functions. The sorts of indicators you choose for your research will determine how visually appealing your stock charts are. For example, you may make some graphs to help you decide where to enter and quit, while others are just for fun. If more than one symbol is traded, try using a distinct backdrop color for each ticker to help you quickly separate data for each particular stock.

TheInvestopedia Academy’sTechnical Analysiscourse provides interactive information and real-world examples to help you better understand the indicators and tools that are essential for trading success.

Layout

Designing the entire workspace (all of the charts and other market data shown on your monitors) is also important.

Multiple Monitors

Having more than one monitor is incredibly beneficial in establishing an easy-to-understand workstation since it allows you to track more securities. One monitor should ideally be used for order input, with the other displays being utilized for charting and other market analysis tools.

If you’re using the same indication on numerous charts, such as a stochastic oscillator, it’s a good idea to set similar indicators in the same spot and with the same colors on each chart. This makes it easy to locate and compare the exact indication across several charts. Figure 1 depicts a two-monitor workplace, with the order input screen on the left and the chart analysis panel on the right.

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Figure 1: A two-monitor workplace with displays for order entry and chart analysis. TradeStation charts were developed.

Indicators and Overlays

To reduce superfluous market data, ensure that all data (including indicators) is relevant, usable, and utilized on a regular basis. If it isn’t, remove it off the chart—it’ll only add clutter. It is crucial to experiment with various data to distinguish between required and irrelevant analytical tools when selecting what is included on charts. When there are more than four or five open windows or charts on the same screen, it might get confusing.

Overlays are indicators that are drawn right over the price bars on a main price chart. Moving averages and Bollinger Bands® are examples of such instruments.

Sub-charts may be used to house additional indicators such as the Consumer Confidence Index (CCI) and the relative strength index (RSI) (RSI).Remember to arrange the indicators in the same order on each chart so that the data is easy to identify and analyze.

Sizing and Fonts

Using strong and sharp fonts will make it easier to understand numbers and sentences. Font size should be decided by how many charts are crammed onto a single display, the value of any written information, and, finally, your ability to read small print. Experiment with various fonts and sizes until you discover one that is comfortable for you. Consider utilizing the same font and size on all charts after you’ve settled on the font and size. Again, this consistency will assist in the creation of charts that are simple to read and analyze.

Saving Charts

Once you’ve created a chart or workspace that you like, save it for later use. (For instructions, see the platform’s “Help” section.) It is not essential to reformat your charts and workspaces each time the analysis platform is launched. It’s also a good idea to capture a screenshot as a backup. Because configuring the charts and workspaces takes time, it’s in your best interest to have a simple way of recovering any lost settings. Choose a broker with whom you are familiar, but also one that provides a trading platform that is suitable for your trading style.

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Where Can You View Stock Charts?

Investopedia, among other financial websites, has a plethora of chart alternatives for stocks, mutual funds, exchange-traded funds, and other financial products.

Do You Have to Make Your Own Charts?

To evaluate stocks, you do not need to design your own charts. There are a plethora of applications and financial websites that provide customisable charts. Professional or technical traders are more likely to make their own charts in addition to utilizing charting tools.

Can You Use Stock Charts for Day Trading?

Yes, the stock charting methods mentioned in the narrative may be used to day trading by constructing charts to assess shorter-term market trends and stock patterns.

The Bottom Line

Setting up effective charts and workspaces takes time, but it is well worth the effort. The ability to swiftly obtain and comprehend market data is critical in the competitive trading environment. You may have all of the necessary information to make sound trading choices, but it is meaningless if you can’t access and comprehend it fast. Creating high-performance chart setups may help you become a more efficient and productive trader by increasing your situational awareness.

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