What does a price chart actually show?

You've glanced at charts throughout the first two courses. Time to read them properly — because a chart is not a picture of a company. It's a picture of agreements.

One line, thousands of handshakes

The simplest chart — the line chart — connects closing prices across time:

Every point on that line is something you already understand deeply: the last price at which a buyer and seller agreed on that day (Course 1). A year of the line is a year of the crowd's shifting verdict about the company's future (Course 2's expectations lesson). Nothing more mystical than that — and nothing less remarkable.

The two axes deserve respect

• Time (horizontal). Charts compress it brutally: a year fits in your palm. That compression creates optical illusions — steady growth looks "slow," a crash looks "instant," though it took weeks of trading.
• Price (vertical). Check the scale before reacting. A chart that "collapsed" may show a 3% dip stretched tall; a "flat" one may hide a 40% move squeezed short. Axis-reading is the first literacy skill, and most scary charts on social media abuse exactly this.

Headlines add a third unit, points, and points mean nothing without the level. On 19 October 1987 the Dow fell 508 points, which was 22.6% of an index near 2,250. On 16 March 2020 it fell 2,997 points, the largest point drop ever recorded, which was 12.9% of an index near 23,000. A 1,000-point fall on a Dow above 40,000 is under 2.5%, a bad day and nothing more. Convert every point move to a percentage of the previous close before you feel anything about it. The candle and the Measure tool on this chart already speak in percent; the news does not.

Linear or logarithmic?

One more scale question, and it decides whether long charts lie. On an ordinary linear axis, a rise from 10 to 20 and a rise from 100 to 110 are the same height, though the first is +100% and the second +10%. On a logarithmic axis, equal percentages are equal heights, which is the only honest way to draw decades: on a linear MAX chart the first thirty years of a great company flatten into a line along the floor and the recent ten look like the whole story. When a long-history chart looks like a hockey stick, check the axis before you check the company.

What charts are for (and not for)

In this Academy's hands, a chart is an observation instrument: where has the price been, how violently did it travel, how does today sit against history? That's reading. Whether lines "predict" anything is the Technical Analysis domain's careful subject — with its own honest discussion of what works, what doesn't, and what's superstition. Here we learn to see clearly first.

Try it now

1. Open a one-year line chart — Apple's is below; for your own anchor company, open it in the Terminal and change the symbol there. Find its highest and lowest points and Measure from one to the other for the % distance between them. That range IS last year's disagreement about the company.

Open AAPL.US in the EODHD Terminal

2. Now stretch to MAX history with the range switch under the chart. Does the shape change the story your one-year view told?
3. One sentence, out loud: "a chart shows agreements over time, not the future." Foundation laid.