What do the bars on a share price graph tell me?


(Emma) #1

I like that Stockrow but I need some help translating it all. This is a screen shot for the S&P 500 over the last year. Is the 2914.04 the pence value (so £29.14) What’s going on with the red are green bars under the line graph? Is that daily indication of losses and gains?


Ask your beginners questions here 🐣
(Dave Smith) #2

If it’s a red bar the closing price that day was less than the opening price, green vice versa. the bottom of a red bar is the closing price and the top is the opening price. the thin tails that extend past these values are the highest and lowest price during that day. This is called a candlestick chart and is based on ancient Japanese charts used by rice traders


(Calum McWhir) #3

This is correct for the candles on the graph itself; I think @Rat_au_van is referring to the very bottom, which denotes volume.

I.e. how much monetary value was transacted over the period regardless of what price it was at? This is what those show, and they take their colour from the candles above.


(Emma) #4

While it was mainly the bottom graph I’m very happy to have learned more about the candlestick chart and especially it’s origins. Best trivia I’ve learned this week :+1:
Thanks both


(Vladislav Kozub) #5

Also wanted to add a bit of off-topic (in regards to the prices you mentioned); as per the Pricing UK Securities, UK (London Stock Exchange) is the only exchange in the world pricing its securities using currency subunits (pence instead of pounds)

Being a US index, S&P 500 is not quite related to GBP in any shape or form. Moreover, the figure you see on the screenshot (2914.04) is not USD either, it is an arbitrary “points” figure that kept growing since 1923 when S&P index was only created (it did not even have 500 companies in it back then).

If you were to buy the S&P 500 index tracker - you probably would either go for the US version SPY (priced at $291) or the UK version VUSA (priced at 4254p or £42.54) Whilst the prices are substantially different - it makes absolutely no difference since they both track identical companies as per the index algorithms. The only reason why their growth will differ is the volatility of GBP/USD conversion rate which British Pound is exposed to.

Just wanted to make sure your week has been absolutely enlightening :wink:


(Emma) #6

The path of enlightenment continues :grin:

Would investing in the SPY rather than VUSA help protect against some of the currency fluctuations?


(Dave Smith) #7

Never even noticed the volume bit :smiley:


(Vladislav Kozub) #8

I would say it is arguable. Say £1 = $1 for now (assume perfect world with no commissions and exchange charges) and you invested £100 into SPY which now turns into $100.

  • If tomorrow £1 = $1.2 (stronger pound because it can buy more dollars for the same one pound coin) and you sell, you will only get £83.33 back (your $100 divided by the 1.2 exchange rate).
  • If tomorrow £1 = $0.8 (weaker pound because it can buy less dollars for the same one pound coin) and you sell, you will get astonishing £125 now (your $100 divided by 0.8 exchange rate).

And this is assuming S&P 500 did not even move in value!

Of course, in real life there are more things to consider, such as interbank exchange rate and commission (if you instantly buy VUSA since it is a UK security), so it is yet difficult to say.

But one thing is more or less certain, on a macro scale, when you invest long-term and for years - not much will be different: VUSA grew by ~250% since August 2012 and SPY grew ~210% during the same timeframe.

Looks like a substantial difference but all purely due to Pound’s conversion: £1 = $1.28 today and £1 = $1.58 exactly 6 years ago. As you can see, Pound got 19% weaker (compare 1.28 to 1.58) hence the VUSA return was 16% better (compare 210 to 250) - almost perfect correlation. The other 3% difference (which is quite negligible) could be due to different portfolio re-balancing dates (this is when the entire portfolio gets reshuffled to match its stocks towards the right allocation split).