Want to trade in Stock Market? Know the basics of Technical Analysis

It’s important to learn about the basics first before explore the world of the technical analysis of stocks. Technical analysis can help you make sense of the way investor behavior drives market prices. No matter how much technical analysis basics research that someone does, there is absolutely no way that anyone can predict what a stock is going to do. You can only predict what is probable to happen, based on the indicators, and then trade what is happening.

Technical analysis is an art of using historic price movements of a stock/index to get direction of future price trends. More than absolute prediction it aids traders to get an indicative on price of a stock/ index in short term.

The stock market is a collection of traders and computers from around the world that are buying and selling stocks.  Every trading decision that traders make leaves a digital footprint. This footprint forms a chart patterns such as bull flags, bear flags, ascending triangles, and many more other patterns. Sometimes there will be multiple patterns within patterns! 

The following parameters are used for analyzing charts:-

Price:  The market price is the current price at which an asset/share/commodity can be bought or sold. It is the highest amount a buyer is willing to pay for a particular stock.

Volume: Volume is one of the most basic and most beneficial parameter to understand while reading a stock/index chart. Volume is the total number of shares traded in a particular stock throughout a specific time. A drastic change in traded volumes can indicate a rise or a fall in prices.

Trend: After volume, trend is the second most essential tool for a trader. A combination of trend and volumes aids the trader to decide on whether to enter or exit a particular trade. Trend is basically classified in three types, uptrend, downtrend and sideways trend or consolidation.

Trend-line: The oldest and easiest way of determining the trend is with a "trend line." All that is required is two support points to draw an uptrend or two resistance points to draw a downtrend.

Support level: is the price around which previously, a particular security/commodity finds incremental demand. Traders use this level to enter the stock.

Resistance level: is a price around which a stock finds incremental sellers. Traders use these levels to exit a long position or even short sell a security.