• Technical Analysis and Candlestick Charts

    Made by: Kevin D

  • Technical Analysis

    What is Technical Analysis?

    Technical analysis is a trading discipline that uses statistical trends gathered from trading activity, such as price movement and volume, to assess investments and pinpoint trading opportunities. Technical analysis is involved with the analyses of price and volume, as opposed to fundamental analysis, which looks at a security's value in relation to financial metrics like sales and earnings.

    What is Technical Analysis for?

    Using technical analysis tools, we could look at how changes in a security's supply and demand will impact changes in price, volume, and potential volatility. It is predicated on the idea that, when combined with suitable trading or investment rules, historical trading activity and price variations of a security could serve as useful indicators of the security's future price movements. It can help improve the assessment of a security's strength or weakness in relation to the market as a whole or one of its sectors. It is frequently used to produce short-term trading signals using various charting tools. Analysts can enhance their overall valuation estimate with the use of this information.

     

    Any security with past trading activity can be subjected to technical analysis. This covers stocks, futures, commodities, currencies, fixed-income, and other assets. Technical analysis is actually a lot more common in foreign exchange and commodities markets since traders there are more interested in short-term price changes.Technical analysis looks to predict the price movement of almost any tradable item, such as stocks, bonds, futures, and currency pairings, that is often subject to supply and demand dynamics. Technical analysis, in fact, is seen by some as little more than the examination of supply and demand dynamics as they relate to changes in a security's market price.

    How do Technical Analysis help people?

    Researchers have produced hundreds of patterns and signals to improve technical analysis trading across the industry. To help traders predict and trade price fluctuations, technical analysts have also created a wide range of trading systems. While some indicators focus mostly on identifying the current market trend, including areas of support and resistance, others are more focused on analyzing the strength of a trend and its chances of continuing. Trendlines, channels, moving averages, and momentum indicators are examples of frequently used technical indicators and charting patterns.

    Indicators that Analyst usually examine

    • Trends in prices
    • Chart Patterns
    • Indications of momentum and volume
    • Oscillators (a technical analysis technique used to identify short-term overbought or oversold conditions. It creates high and low bands between two extreme values and then creates a trend indicator that moves between these boundaries.)
    • Moving averages
    • Levels of resistance and support

    Technical Analysis and Fundamental Analysis

    Technical and fundamental analysis are the two main techniques used to evaluate stocks and make investment decisions. Technical analysis focuses on statistical analysis of price movements and believes that a security's price already represents all publicly accessible information, while fundamental analysis examines a company's financial documents to ascertain the fair worth of the business.

    The process of assessing securities by figuring out a stock's intrinsic value is known as fundamental analysis. The financial health and management of businesses are just as important as the state of the economy and industry as a whole, according to fundamental experts. Fundamental analysts consider earnings, expenses, assets, and liabilities to be significant attributes.

    The only inputs in technical analysis are the volume and price of the stock, which sets it apart from fundamental analysis. The key idea is that pricing takes consideration of all known fundamentals, so there's no need to focus on them. Instead of attempting to determine a security's fundamental value, technical analysts analyze stock charts to spot patterns and trends that indicate potential future movements for the stock.

  • Candlestick Chart

    What is Candlestick Chart?

    Candlestick charts, a type of financial chart employed in technical analysis, visually represent the price movements of assets like stocks or commodities by displaying the high, low, open, and closing prices for a specific period.

    Candlestick Charts Volume

    Candle volume charts are the same as regular candle charts with one important difference. The width of the real bodies varies with the level of volume during that particular session. The greater the volume, the wider the real body and vice versa. This is a very useful way of presenting the data because the signals from the regular candlesticks are preserved, yet the width of the real bodies offers a quick and simple overview of the volume pattern.

  • Parts of a Candlestick Chart

     

    A typical candle consists of two parts: the real body, that is, the rectangular part, and the shadow or wick, that is, the two vertical extensions. The top and bottom of the rectangle are determined by the opening and closing prices for the day. If the closing price ends up above the opening (the real body), it is plotted in white. When it closes below the opening, it is plotted in black. The top of the real body represents the opening price, the bottom the close. This is reversed in the case of a white rectangle where the close is plotted at the top and the open at the bottom.

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    Bullish and Bearish Candlestick Chart

     

    Bullish candlestick charts are usually represented in green or white, signaling a rising market as the closing price exceeds the opening price which shows buying strength. They are characterized by a body at the top which indicates upward momentum, and the line above the body represents the height of the period. On the other hand, bearish candlestick charts are usually represented in red or black to indicate a falling market as the closing price is lower than the opening showing selling pressure. The body is at the bottom which indicates downward momentum, with the line below the body indicating the low of the period. These charts provide insight into market sentiment, with bullish signals suggesting a positive sign and bearish signals indicating a negative sign. Traders analyze various patterns, such as engulfing patterns or hammers for bullish trends and shooting stars or bearish engulfing patterns for bearish trends, to make informed decisions based on prevailing market sentiment.

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  • Guide to Buy Stocks for Beginners

    1

    Select an online stockbroker

    Investing in stocks is most straightforward through online stockbrokers. Opening an account is as easy as setting up a bank account—complete an application, provide ID proof, and choose funding options. Once your account is set up and funded, buying stocks is quick and user-friendly through the broker's website. This method is more convenient compared to using full-service brokers or purchasing stocks directly from companies, making stock market participation accessible to a wider audience.

     

     

     

    2

    Research the stock you want to buy

    Once your account is set up and funded, shift your focus to stock selection. Begin by researching companies you're familiar with as a consumer by looking for companies you want to own.

     

    Start your research with the company's annual report, particularly the management's letter to shareholders for a comprehensive overview. Most of the needed information such as conference call transcripts, earnings updates, and recent news, can be found on your broker's website.

    3

    Decide how many shares to buy

    Approach stock investing without pressure to buy a specific number of shares or go all in at once. Start small, perhaps with a single share, to experience owning stocks and gauge your comfort with market fluctuations. As you gain confidence, gradually diversify your portfolio over time. This approach allows you to build expertise at a comfortable pace.

    4

    Buy stocks using the right order type for you

    There are 2 main order type that most investors uses, market order and limit order. A market order is an instruction to buy or sell a stock at the current market price, ensuring immediate execution.

    Market orders are transactions meant to execute as quickly as possible at the current market price. These orders are the most basic buy and sell trades, where a broker receives a security trade order and then processes it at the current market price.

     

    While limit order allows you to set a specific price at which you want to buy or sell a stock. The order will only be executed if the market reaches or surpasses the designated price. This provide you with more control over the transaction but no guarantee of immediate execution. This order has a big risk since that if the actual market price never fall within the limit order guidelines, the investor's order may fail to execute. This makes limit order more complicated to be excecute compare to market order which is easier to be executed.

     

    For beginners who just got into stock trading, it is recommended to start with market orders. Market order is simple and ensure quick execution at the current market price. Market orders are straightforward, making them a good choice for beginners. As you get more comfortable, you can explore limit orders for a more strategic approach.

    5

    Improve your stock portfolio

    It is important that you keep track all the stocks that you have purchase. This can be done by making a stock portfolio. Stock portfolio is a collection of stocks or investments owned by an individual or an entity. It represents the combined holdings of various stocks that someone has chosen to invest in. The goal of creating a diversified stock portfolio is to spread risk and potentially enhance returns by including a variety of stocks from different sectors or industries. Investors often manage their stock portfolios to align with their financial goals, risk tolerance, and investment strategy.

    6

    Knowing when to sell stocks

    You can sell your stocks when you're satisfied with the profits they've made, or when you need the cash. Ideally, you want to set specific, long-term goals for your investments so that you check both of those boxes at the same time.

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