Charts represent an invaluable tool which can be employed to assess changes in stock behaviour over different time spans. The time span of interest will depend on your trading method. Long term stock traders are more interested in time frames extending to months whilst at the other end of the spectrum are day traders who are interested in hourly stock movements.



One thing to look for in a stock chart is whether or not the stock is exhibiting price variations within a trading range. In this case the highs and lows of the stock's price are bound by a consistent high and a consistent low price. Graphing the highs and lows will show a trading band which shows the sideways movement of stock price over time. The value of a stock exhibiting a trading range is is in making smaller profits based on the smaller variations in price whilst keeping an eye on the stock for potential break out behaviour where the stock my undergo either a steady price rise or decline. Some traders will monitor a stock within a trading range to be ready for a potential breakout.

A chart can also show stock "trends". A "trend line" manifests when either three peak or three troughs can be joined by a straight line. The experienced trader will look for both up trends and down trends since profits can be realized in both these situations. Some trading systems look for changes or breaks in the trend and use those points as a signal to either buy or sell. Identifying trends and taking a position in a timely fashion is a solid way to stock market profits.

Proprietory or custom software can provide many tools for charting analysis to assist in formulating and sticking to a trading system. Used wisely, charting software can save time in integrating information to assist in decision making. Charting software can also be used for archiving your data analysis for future reference.

No matter whether a high tech approach is taken or a simple spreadsheet or paper and pencil is used, individual traders will continue to develop their system to to match their own personal style. Stock trading systems need to allow room for flexible adjustments whilst at the same time allowing the application of a consistent approach as a foundation for more stable trading. Keep in mind though that no matter how good a trading system is, there will always be some losses. The trick is to have your profits be greater than your losses.

Being a savvy trader means to be aware of changes in the landscape of trading systems. At the same time, have the flexibility to create and tweak your system as a blend of both personal insights and trading tools.