Investing is all nice and fun until you look at the stock market graph. You begin to wonder whether you’re cut out for this or if it’s best to leave it to the experts. The disarray of colorful lines is usually the first turnoff before you then try to wrap your head around the numbers and acronyms.
To be clear, you don’t need to be able to perform deep analysis to get started on investment. However, you are better able to make good investment decisions when you learn how to interpret the stock market graph and understand the basic terms used in the chart.
Let’s guide you through this in this article, but first of all, let’s get the basics clear.
What is a Stock Graph?
A stock market graph is a graphical representation of the price of shares of a company over a period. You’ll get more than these details in an advanced chart. However, when you understand the basics of the simple stock market graph, you can better extract the information you need from advanced charts.
What Does a Stock Market Graph Look Like?
There are different types of stock market graphs, but a typical chart will look like what we have below.
The above chart belongs to Apple Inc. You know this from looking at the ticker symbol, which is the series of letters at the top right corner. Apple Inc’s ticker symbol is AAPL.
Now, let’s see what Apple’s chart is telling us.
Interpreting Stock Market Graph
The next thing to look out for in a stock market graph after the ticker symbol is the closing price. From the chart above, the closing price of Apple as of March 2 was $125.12. This is the last price that Apple was traded for during the normal working hours of March 2, which is between 9:30 am and 4:00 pm Easter time. Below that figure is the “After Hours” time price of $125.15. This is the price that Apple’s shares are being traded at after the close of the regular working hours.
Directly below the closing price of March 2, in red, is the figure -2.67. This means that the price for March 2 closed lower than that of the previous day by $2.67. Hence, the previous day’s closing price was $127.79, falling by 2.09%. The red line in the graph shows the fluctuation of the price throughout the day. This line, which runs in the body of the chart against the Y-axis (price in dollars) and X-axis (time) is the backbone of every stock market graph.
While it is mostly red in the graph, there’s an extended gray line. This gray line is the indicator of how the shares are performing during the after-hours trading period.
Basic Chart Terms You Need to Know
For a better understanding of the stock market graph, you should be familiar with the following terms:
- Open, High, Low, and Previous Close. We have already explained the previous close. Open is the first price that starts the regular trading hours, while high and low are the highest and lowest prices within the normal trading hours.
- Mkt Cap. This is Market Capitalization in full and it measures the size of the company by the number of shares on the stock market times the current share price. For Apple, on the above chart, the Mkt Cap is $2.1 trillion.
- PE Ratio. This is simply the price-to-earnings ratio, and it is used to determine if shares are fairly valued, overvalued, or undervalued.
- Div Yield. This is dividend yield in full, and it shows the number of dividends an investor is likely to receive annually. Div yield is written as a percentage of the current share price.
- 52-wk high and low. This is the highest and lowest price that a particular share has traded in the past 52 weeks before the current date.