Factors Considered In Technical Analysis Of A Stock

Primarily the base of trading is to invest funds at a lower price and exit at a higher price. There are two approaches to selecting the best shares to buy for the purpose of earning from investments. You can either focus on the fundamentals of the business or you can consider price data as a base for future predictions. The study of price charts is called technical analysis.

Both fundamental and technical analysis are important methods to select the best shares to buy for beginners. The basis of technical analysis is that the market is cyclical and that historical price trends repeat themselves.

That being said, here are some factors that help technical analysts to select the best shares to buy in India.

Here are some factors considered in technical analysis of a stock:

Phases of the market:

If the market is in a bull phase, then the approach towards picking the best shares to buy is different. On the other hand, if the market is witnessing a correction, it is not the right time to enter the market. Understanding which way the market is going can help make trades. Even though technical analysis relies on charts, understanding geopolitical influences and having awareness about global issues can help supplement technical analysis.

Market breadth:

Market breadth refers to the depth of the market i.e. whether there are more buyers than sellers, the advance-decline ratio i.e. the number of shares that declined versus the number of shares that advanced etc. The market movement can help to make a decision on the best shares to buy for beginners.

Uptrends and downtrends:

An upward movement is called an uptrend and a downward movement is called a downtrend. A steady uptrend or downtrend reflects market sentiment about a particular stock. A trend in any particular direction provides an opportunity to enter or exit a stock.

Support and resistance:

Support and resistance are important concepts to understand when you are picking the best shares to buy now. Support is the price level where the downward trend is expected to stop. After this price, the stock price will slowly rise. Understanding and estimating the support price for a stock can help you enter into a stock at the right time and profit from growth in it. Resistance on the other hand refers to the upper limit for the stock price. It signals the end of the uptrend. Once the stock meets its resistance levels the price starts to correct. This is the right time to sell the stock.

Historical trend:

One of the assumptions of technical analysis is that the historical price trend of a share repeats itself. To analyse the previous price trends of the market, traders and analysts use price charts. The most common price chart used is called a candlestick chart. Some of the other popular charts are line charts, area charts etc.

To make an investment in the stock market, you need to open a demat and trading account with a reputed stock broker like IndiaNivesh, they can help you with backend support for your trades and also provide information and reports that you can use to make your trades.

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Created on Dec 24th 2019 00:40. Viewed 291 times.

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