Share Market Graphs: From Basics to Advanced Analysis

If someone wants to step into the world of trading and investment, knowing how to read stock market graphs is of primary importance. Those graphs assist not only visually in tracking the movements of prices but also provide assistance in decision-making. Graphical analysis, put simply, is a method of representing price movements over a period of time. 

For example, the BSE Sensex, which is one of the stock indices in India, has risen by 10659 points which is a percentage increase of 14.75% since the beginning of the year 2024.  This can be an important point of reference for people analysing share market graphs.

So, this blog aims to explain the basic rules governing the stock market graphs and offer some advanced analysis methods to assist you in your trading endeavours.

Key Components of Graph Analysis

When looking at share market graphs, it is evident that some components are more important than others. The price scale, which is often displayed on the vertical axis, outlines the price range of the stock. Understanding this scale is essential to making sense of the graph upon looking at it.

Volume and Time Frame

Volume, as depicted in bars on the floor of the chart, depicts the number of shares bought or sold over a certain time period. When the volume of trading is comparatively higher, it may signal an increased market interest and may execute large movements in prices. Small volume, on the other hand, would imply that the market is inactive or investors’ certainty is low.

The time period, which is expressed on the horizontal axis, can span from a few minutes to several years. Intraday traders are likely to be interested in short-spanned graphs. Long-term investors, on the contrary, will examine hourly, daily, weekly or even monthly charts.

Moving Averages

Moving averages play a vital role in plotting the trends in the analysis of charts. It is an efficient way of sorting the raw data that has been described in terms of time frames. Stock traders may determine the upward or downward trend of certain stocks by looking at the average price over a certain period.

Advanced Analysis Techniques

Anyone looking to extend their knowledge base on share market graph analysis will benefit from certain techniques that take their decision-making ability a notch higher. For example, one employs the identification of levels of support and resistance. A support level is usually the level below which the price of the stock is not likely to reach and will bounce back, whereas resistance is the outer limit above which the price does not go. Such levels can shed light on how easy it will be to make a profit on some of the predicted price movements.

Breakouts and breakdowns are important concepts in advanced analysis. A breakout takes place when the stock price exceeds the previously established resistance level, thus indicating that the stock is likely to experience an upward trend. A breakdown, on the other hand, is when the price drops below the established support level, predicting a downward movement. Keeping track of these events can enable traders to profit from large swings in the market.

Nifty and Sensex Graphs

In the Indian stock market, the significance of the Nifty graph and the Sensex graph is special. For instance, Nifty 50 includes 50 of the most important companies on the NSE. In contrast, the Sensex graph reflects the movement of 30 benchmark stocks of BSE. It is important to peer into these indices in order to get an overview of the market and its sentiments.

In Conclusion

By learning share market graph analysis, people can make more informed choices in a highly dynamic marketplace. Whether one uses elementary line charts or advanced candlestick patterns, knowing how the price moves and the current trends is a prerequisite for trading. 

If you seek to improve your investing decisions, the Research 360 app from Motilal Oswal can be of great help. This stock screener application is an all-in-one resource that provides effective market analysis to help you make informed investment decisions.