How to analyze Stock Market Trends 5 Rules for predicting Stock Market Trends

Here, the vertical line represents the range whereas the horizontal line- pointing left shows the opening price and the horizontal line- pointing right shows the closing price. In a daily chart, the volume is the number of share units of the stock traded. It reflects the demand for the stock at a particular price point.

Thus, there seems to be no specific change in the bottoms and tops for a long period. It is only technical analysis that addresses the ‘what-is’ and also gives you a ‘what-could-be’ situations. Trouble arises when one cannot map or structure the ‘what is’ in a proper way. There is too much noise happening in the present and that colours the judgment of ‘what-is’. If you own the stock, you must track when the dividends and stock split occur.

Stock charts help the investors and traders learn not only about the individual stocks but also the target industry or even the index. Investors or traders can modify the charts to suit their needs by selecting the required time frame and their area of concentration on the macro or the micro level. Learning the ability to read stock charts primes the investors and traders with a good tool for stock analysis.

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Here, the stock price is doing the same thing with the support and resistance lines. A most common type of chart tracks the closing prices of the stock of a specific period. A dot denotes the closing point, and all the dots are connected by a line to make a graphical representation. No need to issue cheques by investors while subscribing to IPO. As explained above, if the candle is hollow, then the stock closed higher than its opening price and vice-versa if it is filled with any colour. Hence, when you glance at a hollow candle chart, if you can see more hollow candles, then it means that the stock price has experienced intraday price increases more frequently.

Another variant of the double tops and bottoms pattern is the triple tops and triple bottoms pattern. It looks similar to the head and shoulders pattern, but instead of shoulders, it just has three heads. In other words, the shape of the peak and all three waves is roughly the same. Period – This is the number of periods that you want to calculate the standard deviation for. If you are looking at a daily chart and a period of 30, then it means that the indicator will calculate the standard deviation for 30 days.

how to read the stocks

Please keep in mind that the candlestick chart is not a tool that gives information on the open and closing price but only the relationship between these two. Most traders spend time understanding the Bollinger band indicator and estimating entry/exit points to book profits. For example, some traders believe that if the stock price starts rising from the lower band and crosses the moving average line, then it usually hits the upper band. Candle or candlesticks are a great visual representation of the fluctuations in the price of a stock. Traders use this to identify trends and estimate the direction the stock price can take in the near term. These are highly popular among traders and investors as they pack a lot of information in them.

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But keep in mind that not all candlestick patterns would be true. There are a higher chance that you might be wrong many times, but then it’s a way to know where the market might go along with other pointers. An important finding would be the support and resistance lines.

how to read the stocks

The movement of the volume and closing price in comparison to the previous day’s closing price is represented by a specific color and needs to be analyzed carefully. Smart traders are able to read stock chart and fetch profit irrespective of whether the market is going up or falling down or just simply moving sideways. So can you also do that by understanding simple basic chart patterns and chart analysis using real examples by Trading Fuel expert article. This value is constantly adjusted according to the time, and it is a vital tool in stock analysis.

The current market trends have shown a good jump in the share prices of many stocks as well as the index in general. An important part of learning about the stock markets and technical analysis is the ability to read stock charts. Be it a share market chart or a technical chart, it plays a very important role in identifying the current trends and trends reversal. Also, to trigger the buy and sell signals it plays a crucial role.

You can choose the view based on where you are accessing the chart. A broader picture ensures a broader perspective; likewise, looking at different timescales helps you get a broader perspective of the stock and longer and shorter-term trends. These are considered the levels at which the stocks stay over a period.

The charts would showcase such a pattern where the prices showcase a rise and fall of the stock. But then, in a bull market, the prices would from a higher high and lower low kind of variation. Support is where the prices have been bouncing back from that location repeatedly, and resistance is the phase where the price is trying to break that line repeatedly to grow even further. Reading charts of stock in the stock market is quiet a simple task provided you know what you’re looking for.

But then factors such as stock selection, investment amount do play a significant role in the profits your reap. Candlestick patterns are quite important as they tell w whole lot more about the stock price at that time interval. Its where knowing the ending of the candle stock and then seeing what type of pattern is making can be availed.

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However, the Indian stock markets went through a minor correction which resulted in a muted performance of some IPOs. The market negativity coupled with the lofty valuations of some of the IPOs led to poor listing gains, but the craze might not be over. The first and foremost thing that you might want to look out for is the chart’s trend. No matter where it goes, you need to understand how the stock is performing, and any breaking points to rising even higher.

  • The same signal that worked brilliantly last time may fail to do so this time.
  • There is too much noise happening in the present and that colours the judgment of ‘what-is’.
  • If you study prices over a long period of time, you will be able to see all three types of trends on the same chart.

If the stock trades below the company’s intrinsic value, you can invest in it. But, technical analysts believe that a stock’s price already reflects everything that has or could affect a company. On a candlestick chart, the red candles show downward price movement, while the white candles show an upward price movement.

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Trends allow you to know the direction the market is taking, upward, downward or stable, and also tell you something about potential future directions. Many traders study previous market trends that align with circumstances in a country. For instance, knowing about historical trends of the market during similar times of inflation or economic downturn may help to analyse a stock’s return potential. You may also be able to determine a particular sector to invest in by analysing the markets regularly. Charts make it easier to predict where a stock is going, as prices tend to form patterns at regular intervals. Depending on the interpretation methods adapted by an investor, they will invest in the stock, and only time will tell whether their take was right or wrong.

By submitting this form I authorize to call/SMS/email me about its products and I accept the terms of Privacy Policy and Terms & Conditions. Hence my oft-made statement is, it is not the news that is important, but the market’s response to the news which is important. So, if we do not make an effort to understand the context, we may not succeed in making accurate how to read the stocks forecasts. It will then become a hit-and-miss story; not good if you want to be a successful anything in the market. It is more important to identify the context in which signals are emerging than to spend all the time identifying the signal itself. It doesn’t matter what the starting point was – a book, a course, a video and a talk that sparked the interest.

The chart is divided into two sections upper and smaller lower which guides on the prices. The upper part tracks the changes in the price of stock over the period. The prices are often shown with different colors like if the stock closed up on a particular day, the marker may be black.

Intraday trading is more risky and challenging when compared to long-term investing. Is it not a preferred option for beginners as it requires considerable capital, expertise, adequate knowledge about trading, and multiple other factors. For beginners, the best way is to deploy the majority of your capital towards long-term investments and use the remaining for hedging or short-term trading. The things to look out for are the patterns, candle stock patterns, the trend in the market, support, and resistance lines.

However, if the line is too flat, it calls into question both the validity of the trend and its predictive powers. In this chart above, red and green indicate if the stock began the interval trading lower or higher than the previous trade of the last interval. If the price is lower at the end of the time interval in comparison to the beginning, the bar will be red. This one is created if there are three consecutive waves appearing on the stock chart as circled in the image above. There, you can notice that the middle wave is higher than the others, right?


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