How to read a chart
A chart displays data. Check what is measured, the units and the period before drawing conclusions.
Start with the title and source. A time axis may show days, months or years; the vertical axis may show price, percentage change or portfolio value. Read axis labels rather than assuming time follows the language direction. Lines show change over time; bars compare amounts; a candle shows open, close, high and low. Green alone is not enough information. Time range and scale change how dramatic movements look: an axis starting at 99 can exaggerate a move from 100 to 101, which is still 1%. Compare the same period and currency, and distinguish price charts from total return including dividends and costs. Past data is not a forecast or a trading instruction.
Practice data for five days: 100, 110, 99, 105, 108. The total increase is 8%. From day 2 to 3, the drop is 10%: 11 divided by 110. A 10% rise followed by a 10% fall turns 100 into 99, not 100.
Plot the five points, label axes and units, and compare the whole period with days 2–3.
Investor.gov · Performance reports ↗Check your understanding
What is the change from 100 to 108?
- 8% increase
- 108% increase
- 8% decrease
Answer and explanation
8% increase. Divide the increase of 8 by the starting value of 100.
Does a rising historical line guarantee future gains?
- Always
- No, it describes past data
- Yes, if green
Answer and explanation
No, it describes past data. Past performance does not guarantee future results. Check periods, units, costs and risk.
Continue learning
What is money? — Money is a common means of payment used to buy things and compare prices.
Checking account: the home of daily money — A checking account (OW"S) is a current account: a bank account for everyday transactions.
Stock: a small piece of a company — A stock is a share of ownership in a company.