A price chart is a record of transactions, nothing more. It shows what buyers and sellers agreed at various moments. Read properly, it tells you about liquidity, volatility and the context of today's price. Read badly, it becomes a device for seeing patterns that are not there.
This guide covers what the elements actually mean, and — more usefully for African markets — the specific ways in which charts of thinly traded shares mislead.
The axes
Time runs along the bottom, price up the side. Two choices about the axes change what you see:
The time period. A one-month chart and a five-year chart of the same share can tell opposite stories, and both are accurate. Before drawing any conclusion, check the period. A share "collapsing" on a one-week view may be unchanged over two years.
Linear or logarithmic price scale. On a linear scale, equal vertical distances represent equal cedi amounts. On a logarithmic scale, they represent equal percentage changes. For long periods or large moves, logarithmic is the honest choice: a move from GH₵1 to GH₵2 and one from GH₵50 to GH₵100 are both a doubling, and a linear chart makes the second look vastly more dramatic.
The three common chart types
| Type | Shows | Best for |
|---|---|---|
| Line | Closing price only | Long-term trend; least cluttered |
| Bar (OHLC) | Open, high, low, close | Seeing the range traded within each period |
| Candlestick | Same four values, shaded by direction | Quickly reading whether each period closed up or down |
A candlestick's body spans open to close; the thin lines above and below — wicks — reach the high and low. A long wick means the price travelled there and did not stay, which tells you something about where buyers or sellers appeared.
Volume is the part most beginners ignore
Volume — the number of shares traded — is usually shown as bars beneath the price. It is the single most important element on a chart of an African listing, because it tells you whether the price is meaningful.
- A price move on heavy volume reflects genuine disagreement resolved between many participants. It carries information.
- A price move on tiny volume may be one small trade. A share can appear to jump 8% because a few hundred shares changed hands at an odd price.
- Zero volume means no trades occurred. The quoted price is simply the last one, which may be days old.
Gaps, and why African charts have so many
A gap is a jump between one period's close and the next period's open with no trading in between. In a liquid market, gaps usually follow news released outside trading hours.
On a thinly traded counter, gaps appear simply because nobody traded at the intervening prices. These are not signals. Treating them as such is reading meaning into absence.
What trend lines and moving averages do
A moving average is the mean closing price over a defined number of periods, recalculated each day. Its purpose is to smooth noise so the direction is easier to see. A 50-day average responds faster than a 200-day one.
Two honest statements about moving averages:
- They describe what has already happened. Every moving average is, by construction, a lagging summary.
- Crossovers between a faster and slower average are widely watched, which is itself part of why they sometimes appear to work. On low-volume counters they generate frequent false signals.
A trend line drawn along successive lows or highs is a visual aid, not a law. The number of lines you could plausibly draw on any chart is large, and selecting the one that fits your existing view is the easiest mistake in the discipline.
Support, resistance and the honest version
Support is a price level where buying has previously appeared; resistance is where selling has. The reasoning is behavioural — participants remember prices, and some place orders around them.
The honest framing: these are levels where the price has previously paused. That is a statement about history. It becomes predictive only to the extent that participants behave consistently, which they do sometimes and not others. Treat them as areas of interest rather than as decisions.
What charts cannot tell you
Whether the company is any good. A chart contains no information about profitability, debt, management or competitive position. For that, read the accounts — see analysing financial statements.
Whether the share is cheap. Price alone cannot answer this. Value requires the relationship between price and the business — see market capitalisation explained.
What happens next. If chart patterns reliably predicted prices, the pattern would be traded away as soon as it became known. This is not an argument that charts are useless; it is an argument about what they are useful for.
What charts are genuinely good for
- Context. Is today's price unusual relative to the last two years, or ordinary?
- Volatility. How much does this share typically move? That tells you what a normal fluctuation looks like, so you do not mistake noise for a crisis.
- Liquidity. The volume bars tell you whether you could realistically buy or sell a meaningful position.
- Comparison. Plotting a share against its index shows whether it is outperforming or simply moving with the market.
- Timing an execution. Once you have decided to buy on the fundamentals, the chart helps you avoid placing a market order into a thin, erratic session. See how to buy shares on the GSE for why limit orders matter here.
A sensible reading routine
- Set the period to several years, on a logarithmic scale. Establish the long trend.
- Shorten to one year. See the recent range.
- Look at the volume bars across the whole period. Decide whether the chart is describing a liquid share or a sporadically traded one.
- Overlay the index to separate company-specific movement from market movement.
- Note the levels where price has previously turned, as context rather than instruction.
- Then go and read the financial statements, which is where the decision actually gets made.
Historical price and volume series for the exchanges we track are downloadable from our Data Commons if you would rather plot them yourself.
Frequently asked questions
Does technical analysis work on African exchanges?
Most chart techniques assume continuous trading by many participants. On counters that trade sparsely, that assumption fails and the signals become unreliable. Techniques work better on the most liquid listings and poorly elsewhere.
Which chart period should I use?
Several. A single period gives a single, possibly misleading story. Checking five years, one year and three months takes moments and prevents most misreadings.
Why does the price not change for days?
Because no trades occurred. The displayed figure is the last traded price, not a current valuation. Check the volume and the timestamp.
In short
Read the axes, prefer logarithmic scales over long periods, and look at volume before you look at the price line. Use charts for context, volatility and liquidity — and make the actual decision from the accounts.