Stock graphs or charts are basically time series plots where the vertical axis represents price scale while the horizontal axis represents the time scale. Prices are plotted along the x-axis from left to right. Charts like these are used by analysts to forecast future price trends based on past price movements. However, these are not absolute predictions. But, like weather forecasting, analysts can help investors or traders to anticipate what is most likely to happen over time, based on data of previous time periods.
Data in a stock graph is usually compressed to show data within a certain timeframe, whether daily, weekly, or monthly. Different kinds of people focus on different timeframes on the chart. Traders concentrate on daily trends, paying more attention to short-term price movements. Investors, on the other hand, focus on weekly or monthly periods of activity to spot long-term trends. Long-term charts give a big picture of price activity over a longer range of time, while daily or intradaily charts focus on the day-to-day movements.
There are different kinds of graphs that can be used: line graphs, bar graphs, candlestick charts, and point & figure charts. None of these, however, are considered better than the rest and each server a specific purpose or is used to focus on a certain aspect of the same data. It doesn’t matter which graph an analyst chooses and is usually just a matter of personal preference. After all, it’s the same data that is being presented, only in a different view. At the end of the day, it is the actual analysis of the data that is important to an analyst’s success.
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