Making your way into the exciting world of intraday trading for beginners? While you may be attracted by the possibility to make quick money, know that it does not come easy. Like in other types of online share trading, traders need to carry out thorough research before executing any intraday trades. A useful resource in this regard is the stock trading chart. It can help you identify patterns in stock movements and develop your intraday trading plan accordingly.
How trading charts help
A stock chart shows you the price and transaction volumes of a particular stock over a period of time. At a glance, the chart depicts whether the stock price is moving up or down. But it can also tell you if the stock is moving abnormally, how institutional investors are reacting, and whether a price trend might be starting or coming to an end.
With the help of a daily stock chart, an intraday trader can assess the best entry and exit points during online share trading. Weekly and monthly stock charts are useful for identifying longer-term trends and price patterns.
Types of trading charts
Intraday trading for beginners becomes simpler when you learn to read different trading charts. Here are a few common types of charts that could inform your intraday trading strategy.
- Line chart: Cut your teeth on the line chart as a beginner. Traders often look at line charts that focus on the opening or closing prices of different stocks. Here, the prices over a period of time are connected by lines to create the chart. You thus get an idea of how prices are moving, but you might not decipher more specific details like the trading range, highs, lows, and other price patterns.
- Tick chart: A tick chart shows the market activity for a stock and can help you assess the level of volatility. Each tick represents a certain number of transactions. For instance, in a 233-tick chart, each bar stands for 233 transactions. More bars appear when market activity is high and fewer bars when activity is low. The time period and number of shares traded are not considered here.
- Volume chart: The focus here is on the number of shares being traded. In a 500-volume chart, for example, a new bar appears once 500 shares have been traded. Like in the tick chart, a higher number of bars is indicative of increased market activity, while fewer bars signal low activity.
- Range bar chart: The bars printed on a range bar chart represent changes in price movement. Consider the case of a 10-tick range bar chart. Here, each bar represents 10 ticks in the price movement. So, if the bar starts at 283.0, the next bar will get printed 10 ticks later—at 284.0 if the price rises or at 282.0 if the price falls. The chart offers more precision when tracking stock price movements.
- Intraday chart: Intraday traders often use hourly charts that highlight the opening and closing prices as well as highs and lows for each one-hour interval over a given period. You could also look at 15-minute, five-minute, and two-minute charts for a closer view of how stock prices are moving.
Using charts in trading strategy
What’s the best way forward for beginners? Test out different charting tools to develop an understanding of how they might work. If you open a trading account with a brokerage like Kotak Securities, try out the different charting tools on offer. For instance, you could change some of the default settings to see the impact this has on the results. Experiment a bit to see which chart options suit you the best.