An Introduction to Stock Market Data Analysis

Visualizing Stock Data

Now that we have stock data we would like to visualize it. I first use base R plotting to visualize the series.

plot(AAPL[, "AAPL.Close"], main = "AAPL")

A linechart is fine, but there are at least four variables involved for each date (open, high, low, and close), and we would like to have some visual way to see all four variables that does not require plotting four separate lines. Financial data is often plotted with a Japanese candlestick plot, so named because it was first created by 18th century Japanese rice traders. Use the function candleChart() from quantmod to create such a chart.

candleChart(AAPL, up.col = "black", dn.col = "red", theme = "white")

With a candlestick chart, a black candlestick indicates a day where the closing price was higher than the open (a gain), while a red candlestick indicates a day where the open was higher than the close (a loss). The wicks indicate the high and the low, and the body the open and close (hue is used to determine which end of the body is the open and which the close). Candlestick charts are popular in finance and some strategies in technical analysisuse them to make trading decisions, depending on the shape, color, and position of the candles. I will not cover such strategies today.

(Notice that the volume is tracked as a bar chart on the lower pane as well, with the same colors as the corresponding candlesticks. Some traders like to see how many shares are being traded; this can be important in trading.)

We may wish to plot multiple financial instruments together; we may want to compare stocks, compare them to the market, or look at other securities such as exchange-traded funds (ETFs). Later, we will also want to see how to plot a financial instrument against some indicator, like a moving average. For this you would rather use a line chart than a candlestick chart. (How would you plot multiple candlestick charts on top of one another without cluttering the chart?)

Be the first to comment

Leave a Reply

Your email address will not be published.