Basic Of Charting And Stock Market Analysis

Basic Of Charting The Stock Price And Basic Market Data

For basic of charting the stock price let’s get some insight into the stock market trading process. All trades taking place between two traders in exchange are recorded as tick data for each and every stock in the market. This includes the stock symbol, trading price, quantity of shares and time at which trade took place. Below is a sample of tick data for XYZ stock for trading taken place from 13:10:00 to 13:10:59 i.e.1 minute in table form:

Tick data of XYZ stock in 1 Minute

SYMBOL         DATE          TIME    TRADE PRICE      QUANTITY
XYZ05/11/1613:10:021811500
XYZ05/11/1613:10:05181.05200
XYZ05/11/1613:10:08181.1500
XYZ05/11/1613:10:09181.210020
XYZ05/11/1613:10:11181.1515300
XYZ05/11/1613:10:14181.12520
XYZ05/11/1613:10:16181.156300
XYZ05/11/1613:10:20181.23200
XYZ05/11/1613:10:23181.259000
XYZ05/11/1613:10:28181.313200
XYZ05/11/1613:10:33181.255000
XYZ05/11/1613:10:34181.3510600
XYZ05/11/1613:10:35181.32530
XYZ05/11/1613:10:38181.4521000
XYZ05/11/1613:10:41     181.351600
XYZ05/11/1613:10:45181.313200
XYZ05/11/1613:10:49181.226500
XYZ05/11/1613:10:55    181.2526050
XYZ05/11/1613:10:56181.31800
XYZ05/11/1613:10:58181.3516000
XYZ05/11/1613:10:59181.33250

 

 

 

 

 

Tick Charts

Watch Here that this data is of all trade happened on XYZ stock from 13:10:00 to 13:10:59. This is only 1 minute on 5th November 2016 and that contains 21 No. Of trades in the price range of 181.00 to 181.45 that is indicated as trading price and quantity of share traded is indicated in the last column. This tick data can be represented in chart form as follows:

Basic Of Charting The Stock Price tick-data-chart
Basic Of Charting The Stock Price tick-data-chart

The above chart is called a tick chart, here the price is plotted on Y-axis and time is plotted on X-axis. This is the normal convention of charting in the stock market. In this chart minimum, the allowable price difference is 0.05 Rs. which is called a tick value that means the trading price of the share can only be in multiples of 0.05 Rs.

As any liquid stock will have very large no. of trades during a trading session, the tick chart of a session will be quite large to analyze so tick chart are compressed using time compression in 1,5,10,15,30,60 minute, Daily OR Weekly format as required by the user of the chart.

Basic Market Data Fields

Let us now understand how the above tick chart of XYZ is compressed in 1-minute chart format.

For this, we required five basic price field from the above tick data of XYZ stock.

  1. Opening Price: This is the trading price at the very first trade of selected timeframe. In case of XYZ stock, we have first trade at 181.00
  2. Closing Price: This is the trading price at the very last trade of the selected timeframe. In case of XYZ stock our selected time frame is 1-minute so we will consider 13:10:59 as last trade and that is 181.30
  3. Highest Price: This is the highest trading price in the selected timeframe. Here we have 181.45 for XYZ
  4. Lowest Price: This is the lowest trading price in the selected timeframe. Here we have 181.00 for XYZ
  5. Volume: This is total shares traded during the selected timeframe. Here the total sum of traded quantity of shares is 189270 shares.

So now we have only 5 price fields instead of the tick data which is representing the all trading activity in a compact form. This price field is represented as O-C-H-L-V respectively in short form. This price field is like the highlights of the trading activity occurred in that timeframe. Of course, we are losing the movements between that time but for purpose of analysis in the higher timeframe, it will not be of much importance.

Candlestick Charts

Now how can we represent this data in chart form? There are various methods for that, the most popular is candlestick charting method. In candlestick chart the Open and Close is indicated as the body of a candle, High and Low is indicated at wick of a candle, the same is indicated in following drawing for easy understanding.

Basic Of Charting The Stock Price candlestick
Basic Of Charting The Stock Price candlestick

 

So now we can represent the OHLC data in form of candle with a chart on which Y-axis represents trading price and X-axis represents the time of trading. The trading volume is represented as a histogram in the bottom panel in the chart.

As in the case of our example, our data is like this:

O: 181.00, H: 181.45, L: 181.00, C: 181.30, V: 189270 and time of trading is 13:10 to 13:11 so we can draw this 1-min candle in chart form as follows:

Basic Of Charting The Stock Price candlestick candle-chart construction
Basic Of Charting The Stock Price candlestick candle-chart construction

Note here the L is equal to O so the lower shadow or wick of the candle is not shown. Also, note the green color of the candle which represents C is higher than O. Instead if C were lower than O then the color of candle body would be red as shown in the following drawing.

Basic Of Charting The Stock Price down candlestick
Basic Of Charting The Stock Price down candlestick

Coloring The Candlesticks

By observation of color of candle, we can judge the price movement in the selected time period. If the candle is green then the price movement in the time period was rising and if the candle is red then the price move was downward. If we draw all intraday data in 1-minute chart form it would look like below chart.

Basic Of Charting The Stock Price down candlestick icici-1-min-chart
Basic Of Charting The Stock Price down candlestick icici-1-min-chart

 

The points to be noted in this charts are as below:

  • X-axis is time axis indicating 1-minute timeframe
  • Y-axis is price axis indicating share prices
  • Each and every candle is positioned as per their respective OHLC value
  • The color of candle are green and red depending upon position of O and C
  • In Top right side of chart is description of OHLC value of last candle, its symbol and date and time
  • The volume of trading in each and every candle is indicated as histogram bars in bottom panel

Bar Charts

Other than candlestick chart, the other popular method of charting is Bar charts. In this type of charts, the H-L is represented as a small vertical line on the chart. O is represented as a small notch on the left side of line and C as a right notch. The same can be easily understood by the following drawing:

Basic Of Charting The Stock Price down bar-chart
Basic Of Charting The Stock Price down bar-chart

Here the bar chart represents the same candlestick chart drawn for the tick data on 5/11/2016 from 13:10:00 to 13:10:59. The following is the same chart as previous candlestick chart but here the candlestick are replaced with bars.

Basic Of Charting The Stock Price icici-bank-bar-chart-1-min
Basic Of Charting The Stock Price icici-bank-bar-chart-1-min

 

You can also watch all of these and more about charting in the following video:

15 thoughts on “Basic Of Charting And Stock Market Analysis

  • 06/12/2017 at 8:08 PM
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    Thanks for information.

    Reply
  • 20/09/2017 at 3:32 PM
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    how can i get the mq4 form of the indicator ????? even if its a payied service

    Reply
  • 05/08/2017 at 4:12 PM
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    You site is really good. Please keep it updated .

    Reply
  • 29/04/2017 at 1:39 PM
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    good work in educating sharemarketkidees

    Reply
  • 01/04/2017 at 7:12 PM
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    Hi, very nice post. I was looking for something similar to this. Thanks for this useful information.

    Reply
  • 22/03/2017 at 11:20 AM
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    I believe, WordPress is to blogging is like Google is to web search… Your list of top wordpress powered websites is surely a motivation for more bloggers to switch to it!

    Reply
  • 10/03/2017 at 2:31 PM
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    How do I open an .afl file . I use the mt4 system. thanks

    Reply
  • 25/02/2017 at 9:00 PM
    Permalink

    Hello Rakeshji,
    Its an nice to see ur advance trading ideas by videos u made it for us, I m watching regularly,but still i m unable to find all ur afl code scanner and exploration some of them still missing,you have not made available in download section. 2 Day Narrow Range scanner AFL ,Floor Pivots AFL, and so many which u talk about ,but i couldnot able to find where it is available for download the afl codes ,if possible please send me an email all of yours afl codes,exploration and scanners to my email : vijayrajtrader@gmail.com

    I have special request for you to make an scanner for finding a morning first breakout trade at the opening by gap or other trading logic by floor pivots breakout and reversal sign.

    condition is simple
    1. find stocks which are more than 1 day or more trading in consolidation zones (trading in a narrow zone) .
    2. from the result filter some stocks which made an breakout (gapup open) /breakdown(gapdown open) by trading range at the opening price or ( open price to first 5 mintue close price. or so on we needs a sign of Breakout / Breakdown from trading zone break of sign .
    (scanner must generate result in every 1 minute as per our condition satisfied it has to show the result)
    3. with increase in volumes 10 candle to 20 candles avg high volumes) needs.

    thats all i think for now.

    if possible try to give suggestion on finding a good stock which can take a trade as a BTST or STBT on the trading day time between 2.30pm to3.15 p.m,
    the same stocks too filter the above given condition as per above on next day trading morning at the opening as a breakout or breakdown trade for purely intraday.

    can we get like that scanner ,hope you will help me to get this scanner.

    Reply
  • 04/01/2017 at 6:15 PM
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    sir mt4 ka mql4 scipt ko afl me kese error free kar sakte he?

    Reply
    • 02/01/2017 at 9:22 PM
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      Yes you can use Magical trend indicator for commodity, forex and stock as well. It is very good for volatile and trending markets.

      Reply
  • 01/01/2017 at 10:09 PM
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    SIR :- MY TRADING ACCOUNT IS IN ZERODHA, I DOSE INTRADAY IN COMMODITY, CAN IT BE POSSIBLE TO INSTALL YOUR MAGIC TREND INDICATOR IN ZERODHA-KITE TRADING PLATFORM ?
    MY EMAIL DAILYMAIL86400@YAHOO.COM —-X—-

    Reply
    • 02/01/2017 at 9:39 PM
      Permalink

      You can’t directly use magic trend indicator in zerodha platform but you can use it in pie trading platform with pie trading bridge but it is paid service.

      Normally we use amibroker for generating trading signals and trade the same in our broker platform and this is very reliable method using any custom indicator. With amibroker trading software you can use any indicator or system and there are many more advantage over normal broker platforms. To know more about amibroker watch this video:

      Reply

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