Stock charts are a useful way of viewing the historical price movement of a security. The visual ups and downs of the line in the chart convey meaning in a way that a table full of numbers can not. One quick glance at a chart can give you meaningful perspective on the stock’s past performance and serve as a useful data point in your analysis.
A typical line stock chart in StockMarketEye looks like this:
The upper portion of the chart is called the Price chart. In the example above, the blue line shows the closing values of the stock. Moving the mouse over the chart will display the chart cursor. The details of the day under the cursor are shown in the top line of the chart area.
The lower portion of the chart is the trading Volume chart. The taller the bar, the more volume there was on that day.
The colors in the Volume chart also have meaning. A green volume bar means that the stock closed higher on that day verses the previous day’s close. A red volume bar means that the stock closed lower on that day compared to the previous day’s close. A black volume bar means either that the stock closed at the same price that day as it did the day before, or that the chart does not have the previous day’s closing price to compare with (such as in the first volume bar in the chart).
In the Price chart, both the Candlestick and Open-High-Low-Close (OHLC) chart styles convey extra meaning when compared to a simple line chart. Instead of a single point (i.e. the closing price), the day’s activity is shown as a symbol, in which the day’s 4 data points (i.e. the open, high, low and closing prices) are drawn.
The green and red versions of the Candlestick and OHLC chart styles convey extra meaning through the colors. This same meaning is also visible in the monochrome version of these chart styles, but some investors find the green and red versions help them to interpret the meaning faster.
The next chart shows the “Candlestick Green/Red” stock chart type in action. A green candlestick means that the opening price on that day was lower than the closing price that day (i.e. the price moved up during the day); a red candlestick means that the opening price was higher than the closing price that day (i.e. the price moved down during the day).
Compare that with the monochrome version of the same chart. A green candlestick is equivalent to an open candle of the monochrome “Candlestick” chart type; a red candlestick is equivalent to a filled candle.
Although both the Price chart and Volume chart can use green and red to convey meaning, the meaning of the colors is slightly different in each of these chart types. Sometimes the candlestick or OHLC’s color will be different from the volume bar’s color.
For example, if the stock finished higher than the previous day, the volume bar will be green. But on the same day, if the stock moved lower from the opening price, the candlestick would be colored red.
This situation is not that uncommon. For example, if there was a gap up at the open (because of positive company news, analyst recommendation, etc), but the stock moved lower from that point throughout the day, yet staying above the previous day’s closing price, the candlestick would be colored red, but the volume bar would be green.
Colors can be useful to help convey extra meaning in stock charts. Knowing how each color is used in the different parts of the stock chart will help you interpret their meaning faster and get more out of the chart.
StockMarketEye has a wide range of chart styles and technical indicators to choose from. Download your free copy of StockMarketEye today and start keeping your eye on the markets!
Clear and well explained – Thanks!
Has been bugging me for some time. Thanks for the textbook spot on explanation.
When looking at Yahoo interactive charts for one day, the individual trades each have a volume associated with them & some are red & some are green, but the red/green does not appear to be related to the previous close or previous trade. This article did a nice job of covering composite daily volumes, but it didn’t get down to the nitty gritty individual trades. What do the individual trade red/green volume lines mean?
In the intraday charts (1-day and 5-days), the bars are not actually individual trades. They are also composites. That is, each bar represents 1 intraday period of activity. In the 1-day chart at Yahoo Finance the period is 1-minute (i.e. each bar represents 1-minute of trading activity); the 5-day chart at Yahoo Finance uses 5-minute bars. The price line is the price at the end of that period. The volume bar is the amount of trades that occurred during that 1-minute or 5-minute period. You can see this by moving your mouse slowly over the chart and watching the date at the bottom of the chart change for each period you move over.
The red/green of the volume lines in the intraday chart works the same way as it does in the end-of-day charts. The difference is that instead of using the previous full trading day to determine the volume bar color, the intraday charts use the previous 1-minute or 5-minute period to determine the color of the volume bar. So if an intraday period (1-minute, 5-minute, etc) ended higher than the previous period, the volume bar will be green; if it ended lower it will be red; if it ended at the same price (or is the first trade of the day), the volume bar will be black.
in the portfolio stock display chart the individual stock display shows a day low and high
value with a blue line between these numbers. What defines the blue line length and the
point of the time trade value location on this line?
The length of the line in a candle-stick is based on the distance (i.e. value difference) between the high and low values. Each candle represents a unit of time – for EOD (end of day) charts, each unit is 1 day; for intraday charts, each unit is 1 minute or 5 minutes. The trades recorded during the period are aggregated to calculate the high/low/close values during the period. Those aggregate values are used to build the candlestick.