How to Read a Stock Market Line Graph

Investors use stock charts, or graphs, to evaluate the price behavior of stocks, exchange-traded funds and other financial instruments. A line graph is the simplest and one of the most common types of stock charts. You might find one in the business section of the newspaper, on investment websites or on TV shows that discuss stocks. A line chart displays a line that connects a stock’s periodic closing prices. A closing price is the last-traded price of a trading session. Because a line chart shows limited data, you can easily identify a stock’s general price trend.

Step 1

Find the line chart’s time frame near the top of the chart. This represents the interval between each closing price on the graph. A chart might express this as “daily,” “weekly,” “monthly” or some other period. For example, if a line chart has a daily time frame, it shows a series of a stock’s daily closing prices.

Step 2

Locate any point on the line of prices on the chart.

Step 3

Find the date on the chart’s bottom, horizontal axis that is directly below the point. This designates the specific period in which the closing price occurred. On a daily chart, the closing price occurred at the end of that day. On a weekly chart, it took place at the end of Friday of that week. A monthly chart shows the closing price at the end of the last trading day of that month. In this example, if the point aligns with Jan. 15, it represents the last price at which the stock traded on Jan. 15.

Step 4

Identify the price with which the point aligns horizontally on the chart’s right, vertical axis to determine the closing price for that specific period. In this example, if the point is horizontally equal to $22, the closing price on Jan. 15 was $22.

Step 5

Review the overall direction of the line of prices to gauge the general price trend. If the line slopes up and to the right, prices have been moving higher. If it slopes down and to the right, prices have been decreasing. When the line oscillates up and down with no clear direction, the stock has traded in a range. In this example, assume the leftmost point on the line is at $10 and slopes upward toward $22 at the rightmost point. This means prices have been rising and investors have become more optimistic about the stock.

Tip

  • Although a line chart is simple, it excludes information that other types of charts provide, such as a stock’s opening, high and low price each period. It therefore doesn’t show a stock’s price movements between closing prices.

Photo Credits

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