There are many types of analysis in the market to
predict future price action. Below are some of that:
- Candle Chart Analysis
- Fundamental Analysis
- Option Data Analysis
- Elliot Wave / Price Cluster
The people say Candle Chart is good, Fundamental is the
only way, or Elliot Wave is amazing. Everyone is stating as per their own
experience.
I feel all these types of analysis work well. The point
is that which one is suit you, everyone has their own thought or grasping
power. Personally, I have studied the first 3 of the methods and I am using it
as per the situation.
- If I am looking for short to medium-term
investment then I love to prefer Candle Chart.
- When my view is medium to long term then I
go for Fundamental and for accurate entry point take help of Candle Chart.
- Options Data use to identify the market or
stock sentiments for a day or two days.
Today we are going to discuss Candle Chart Analysis
(i.e. Technical Analysis). First of all, we will see the required basic +
important things for Chart Analysis.
- Candlestick
- Volume
-
Indicators / Oscillator
What
is the Candlestick?
As everybody knows, the
candlestick is the base of Technical Analysis. It is the combination of four
value points that are Open-High-Low-Close and each candle having these values.
Sometimes Open=Low, Open=High, Close=High, or Close=Low in this case
candlestick do not have Low or High. Below are types of the candlestick:
Importance of Candlestick: Each candle gives
indication like positive, negative, or neutral. Every candle identifies by its
color & shape and having a specific name as well. Below is the table to
easily understand.
|
Open / Close
|
Signal
|
Type of candle
|
Colour
|
|
Open price < Close price
|
Positive
|
Bullish
|
Green
|
|
Open price > Close Price
|
Negative
|
Bearish
|
Red
|
|
Open price >=< Close price
|
Neutral
|
Neutral
|
Green / Red
|
By combining of multiple candles, the chart pattern is
created like Harami, Engulfing, Piercing, etc.
What
is mean by Volume?
It is the number of shares or contracts traded in a
security or an entire market during a given period of time. For every buyer,
there is a seller, and each transaction contributes to the count of total
volume. That is when buyers and sellers agree to make a transaction at a certain
price, it is considered one transaction. If only five transactions occur in a
day, the volume for the day is five.
Role
of Volume: It is essential for Technical Analysis, the volume
helps to
indicate the strength of the candle. For example, if the stock price
is cross its resistance and closed above the same then it called a breakout. If
the volume of the breakout candle is greater than average volume then we can
say that breakout is strong and vice versa.
What
is mean by Indicator/Oscillator?
It is the supportive tools
that indicate the overbought or oversold for a stock price. It gives a signal
to buy or sell, there are many indicators in the market like MACD, RSI,
Bollinger Band, etc. It is working as a secondary tool which helps to make
strong confirmation for trade.
Key
Points to Take Care:
- Always buy near support/bottom and sell
near resistance/top.
- A bullish candle or pattern near support is
a strong buying signal.
- Bearish candle or pattern near resistance
is a strong selling signal.
- Volume should be greater than the average
volume on breakout or breakdown candle.
- Buy the stock when the indicator is
oversold and sell when overbought.
-
Make a combination of candlestick, volume, and indicator to find
a good opportunity.
Frankly, I feel using these 3 things Technical Analysis
is the best way for the medium-term player. One thing is for sure you cannot do
the long term investment with the help of Technical Analysis.
You cannot become a good
trader or investor just by learning things or rules of the market. You have to
practice it hard.
Click on the below links to join our Intraday Calls channel or details of our training program.
Telegram: https://t.me/Intraday_King
YouTube: Click here
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Disclaimer:
The contents produced here are purely for educational purposes. They
should not be construed as buy/sell recommendations. I am not a SEBI
registered Analyst or Investment Advisor. Readers are advised to consult
their Investment advisor before taking any decisions based on the above
write-up.
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