How to read technical charts
We have a large experience in the stock market. We have seen lots of bearish and bullish trends in the stock market. But it is very clear that whether it is a bullish trend or a bearish trend it can not be sustained forever. We have to do proper analysis where the trend is expecting to take a U-turn. Everybody knows that an Intraday trader must buy in a bullish trend and short sell in a bearish trend. The main question arises that on which level we have to buy and which level we have to sell and what should be our target and stop loss. we have to do lots of research and read charts before providing any recommendation.
The most powerful tools to analyze the large data of the stock market are charts. No doubt charts can not predict the future, but they can give a good prediction about the market trends. We have to analyze different types of charts for different types of investors or traders. Some investors are long term investors, some are short term investors some are an only day or intraday trader. If anybody provides a recommendation to a day or intraday trader after analyzing a long-term chart the recommendation will go in the wrong direction. Vice versa if any analysis provides a recommendation to a long-term investor after analyzing an intraday chart the recommendation will go in the wrong direction. So, it is very important to analyze exact charts suitable to different types of investors or traders. The computer can prepare a chart but which chart suits, good analysis can decide.
While providing recommendations in day trading or intraday trading we have to process lots of information very quickly. It is very important that when we process information in quick mode there are chances of error and mistakes. Charts help us in processing lots of information quickly and most important thing accurately.
Primarily charts are of three types that are commonly used. Different type of type serves a different type of purpose as discussed earlier for intraday, short term or long term.
The first type of chart is a Line chart. The line chart gives us a quick view of the Support and Resistance level of stock. The line chart is a basic and elementary chart. If we analyze the intraday line chart we can easily analyze where the stock is taking resistance and where is the support of the share. If it breaks its support it will go down and if it crosses its resistance it will move forward.
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The second charts which are most popular by technical analysts are Bar Charts. The bottom of the bar shows the lowest price of the trading session and the top of the bar shows the highest price of the trading session. Opening trade prices are shown by small horizontal bars on the left side of the bar. A vertical bar chart some times called a Column bar. Bar charts are scaled like that all the data can fit on the chart.
Another type of chart is the Candlestick chart. Candlestick charts are very simple but very powerful charts. Professional traders use this chart to make money from the stock market. Candlestick charts are most popular amongst traders and analysis.
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