Mastering a skillful art called 'Charts'
Technical analysis can be as complex or as simple as you want. The beauty of technical analysis lies in its versatility.
Technical analysis can be as complex or as simple as you want. The beauty of technical analysis lies in its versatility. Mastering technical analysis through charts is a skillful art. In order to make profits we need to analyse the charts technically.
Whenever we open a chart, we find candles in it. These candles are of various patterns like doji, gravestone doji, dragonfly, spinning top etc.
Many technicians use the open, high, low and close when analysing the price action of a security. There is analysis to be interpreted from each bit of information.
Separately this will not be able to tell much, however when taken together the open, high, low and close reflect the forces of supply and demand.
After identifying the right candle patterns to enter into a trade and if it is coupled with retracement levels it will ensure a good return.
We should always find reasons to reject a stock and not to select. Besides candles we get to see chart patterns like head and shoulder, double bottom, double top, triple bottom, triple top etc. Technical principles of support, resistance, trend, trading range and other aspects can be applied to any chart.
The first step in chart analysis would be to identify the overall trend with trend lines or moving averages. As long as the price remains above its uptrend line, selected moving averages or previous lows, the trend will be considered bullish.
Most of the technical analysts draw support and resistance levels. These (support and resistance levels) can be used extensively to identify the points of entry and exit of a stock or index.
A break below support would be considered bearish and break above resistance will be considered bullish. Technical analysis can help spot demand (support) and supply (resistance) levels as well as breakouts.
Simply waiting for a breakout above resistance or buying near support levels can improve returns. Besides this one can plot various indicators on the chart for technical analysis.
Sometimes charts do not follow indicators but if you focus on support and resistance and study price action it definitely helps in predicting the future price accurately.
The price chart is an easy to read historical account of securities and price movement over a period of time. Charts are much easier to read than a table of numbers. A price chart can offer plenty of valuable information.
We need to focus on chart analysis at every moment of the trade. It is always better to focus on manual analysis rather than using any screener.
(The author is a homemaker who dabbles in stock market investments in free time)