How to Read the Stock Charts

Learn to read stock charts properly.
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Investing in the stock market can be very rewarding, but it can be very risky as well. The level of risk increases when novice investors pick and choose stocks based on incomplete or poorly understood information. Understanding the terms used in stock market charts can make you a wiser, more informed and ultimately a wealthier investor. Wall Street has its own language, and not understanding that language puts your portfolio, and your money, at risk.

Step 1

Pick up several quality financial publications at your local newsstand, or review them at your local library. The Wall Street Journal is an excellent financial publication, as are competitors like Barron's and Investor's Business Daily. Reviewing several publications will help you find the information you are looking for more readily going forward, since the layout of each stock table is somewhat different.

Step 2

Turn to the stock tables and read the columns across the top of the page. Each column lists a specific aspect of the stock, such as the last losing price, the gain or loss for the day and the 52 week highs and lows for the stock.

Step 3

Find the last closing price of the stock. This is the price the stock sold for at the close of the previous day. While this is the closing price, the stock no doubt traded at several different prices throughout the day. Some stock charts list the high and low price for the previous day--those columns are labeled "Day High" and "Day Low."

Step 4

Review the 52 week high and low for one or two of the stocks in the stock table. The 52 week high and low gives you a good indication of how volatile the stock is. If the stock had a 52 week low of $5 and a 52 week high of $70, you can assume that stock will be quite volatile in the future as well.

Step 5

Find the earnings per share in the stock table. This column is labeled "Earnings" or "E/S" for earnings per share. Some stock charts also include a column for price/earnings multiple, labeled "P/E" in the column headings. If the P/E is not listed, you an calculate it yourself by dividing the stock price by the annual earnings.

Step 6

Find the dividend rate of the stock, listed as "Div" in the column headings. If the dividend lists a "q" that is a quarterly dividend amount, otherwise it is an annual figure. The stock table might also list the dividend yield in a column called "Div Yield" or "Div %." If the dividend yield is not listed in the stock table you an calculate it by dividing the stock price by the annual dividend figure.

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