Lesson 5 of 8
Reading a Price Chart
The one chart every investor should understand
Microsoft (MSFT) 1 year. Hover to see prices. Click and drag to measure a move between two points.
A price chart shows one thing: how the price changed over time. The x-axis is time, y-axis is price. When the line goes up, the stock gained value. When it dips, it lost value.
What charts are good for
Seeing the overall trend (up, down, sideways)
Spotting how far a stock has fallen from its high
Comparing two time periods (drag to measure)
What charts can't tell you
Whether a stock will go up or down next
If the company is healthy or in trouble
When to buy or sell
keep it simple
Use charts to understand what happened. Use fundamentals (P/E, earnings, revenue) to understand why. Don't try to predict the future from shapes on a chart.
Check yourself
What's the most reliable way to use a price chart?