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Learning how to trade the stock market successfully can come with a lot of challenges.
Something that can help you create an edge over the market is reading and accurately analyzing stock charts
In this thread, we go through everything you need to know about stock charts
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What Exactly is a Stock Chart?
A stock chart shows you a visual representation of what price has done in history and what it could do in the future
For example, a 15 minute chart shows what the price is doing every 15 minutes,
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Choosing the Best Stock Chart 1. Line Chart
This is the simplest of all the stock market charts. This chart also has the least amount of information and is just one long line moving higher and lower.
It doesnt show the high or low price and reduces noise 4/n
2. Bar Charts
The bar chart and candlestick chart are similar.
The bar chart shows you more information than a line chart as it also shows you the open, close, high, and low that price made for each session.
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3. Japanese Candlestick Charts
Whilst the candlestick chart shows you the same information as the bar chart, it also includes a body. You can normally change the color of the candle body to suit your own needs.
Green : Bullish , Red: Bearish 6/n
How to Read Stock Charts
Some of the most popular strategies for reading stock charts include;
Look for a obvious Trend
Use Support and Resistance
Add important Indicators
Follow Volume Information
Youtube Video of the same:
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Before I proceed Ahead ,
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Obvious trends will tend to run for long periods. Whilst every trend has pullbacks where price makes a move against the trend until the trend fails, it can offer high probability trades 9/n
In the example chart below price is on a trend higher. Price makes regular moves and swings lower against the trend, but the trend overall continues moving higher.
These swings lower against the trend can often be the best spots to look for trend trading entries 10/n
Using Support and Resistance
When using support and resistance in your trading, you can either look for the support or resistance to bounce or for a breakout
Support and resistance are some of the most common forms of trading across all different markets and time frames.
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In the example below, price moves into an important area of support. This could be a high probability area to look for long trades before the price rejects the support level and then moves back higher. 12/n
Adding Important Indicators
One of the most popular indicators in the stock market is the moving average and, in particular, the longer-term 200 ema
The 200 ema can give you a quick indication of the overall price trend, and it can also be used as dynamic support and resistance.
In the example chart below, we can see that price continually stays below the 200 period moving average.
We can also see that each time price moves higher to test this moving average, it rejects it as resistance and moves lower. 14/n
In the example chart below, we can see that price continually stays above the 200 period moving average.
We can also see that each time price moves lower to test this moving average, it rejects it as Support and moves higher.
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Following the Volume Information
When the price is moving higher with increased volume, it is normally seen as a good sign that the stock is strong and healthy. The opposite is also true when the price starts falling, and the volume is increasing.
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6 Continuation Chart Patterns All Traders should know about !
A Thread🧵
What are Chart Patterns ?
A chart pattern suggests what prices might do next, based on what they have done in the past
They are patterns that repeat again and again as they are basically representing human emotions.
These patterns have been into existence since 100s of years!
1. Bullish Triangle
Triangles are similar to wedges and pennants and can be either a continuation pattern, if validated, or a powerful reversal pattern, in the event of failure.
1. Avoid Stocks Below 200 ema 2. Sell Stocks in Stage 4 Down Trend 3. Dont Trade Stocks that are moving in Circuits 4. Avoid News based Trading
A thread With examples🔖
Retweet to Educate Your Trading Friends !
A Study Shows that 90% of the winning Stocks stay above 200 ema before a big Advancing Phase
1. Simply Not Holding or Buying Stocks below 200 ema Saves a lot of time and Money. 2. You can looses opportunity Cost if you buy stocks below 200 ema. 3. TimeFrame: Daily 200 ema
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B. Sell Stocks in Stage 4 Down Trend
1. Stocks Exhibiting this are in complete Bear Grip 2. The 30 week ema acts as reference for stage analysis 3. These Stocks can be short sold on pullback to 30wema 4. Happens after Topping Phase 5. TimeFrame : Weekly , 30 Week Ema
I read one of the Greatest Trading Books so that You dont have to !🧵
Secrets of Profiting in Bull and Bear Markets
by Stan Weinstien
Stan Weinstein's Stage Analysis offers traders a powerful methodology to identify trends in the markets while following strict risk management principles.
Stage Analysis is used to identify the longer-term trend of a stock or index. There are 4 different stages
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4 Stages are :
✅The Basing Area,
✅Advancing Phase
✅The Top Area
✅Declining Phase
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Lime Green Bars Suggests day when the stocks closes near the days high and volume greater than past 10 down volume days Suggesting Institutional Accumulation
Has Features Like :Highest/Lowest Volume in a year.
Modified version of Bollinger Bands
When price is written in blue, volatility overall is falling. When the outer bands start to fatten up in blue, a contraction signal is forming. Works with any length of your choosing
The best website for charting . Has numerous tools to organize your watchlists , add custom indicators , backtest Strategies , set alerts and use multiple charts in single screen .
The most popular websites in the world
2. Market Pulse
Provides great interface on mobile app.
You can set alerts , make drawing on charts,add numerous indicators .
If you are a person who trades on mobile this is a go to app market-pulse.in