5 Mantras of Technical Trading

5 Mantras of Technical Trading

1. A way to analyse: Technical analysis looks at things like prices, trading volume, and price movements to understand the direction in which an investment would move and indicate entry and exit levels. It can help you identify the trend in prices, the strength in trend, and indicate when the trend starts becoming weak.

2. Trend line: When a stock trades, it has an opening price, a closing price, a high price for the day, and a low price for the day. When you connect a particular price point, for example closing prices, over a period of time, you get a trend line. If closing prices have been increasing, the trend line will keep moving up and if closing prices are decreasing, the trend line will move down.

3. Volume: When a security trades it means that there are people who buy and sell the security at a certain price point. If the buyer’s and the seller’s price match then a trade takes place. The number of trades that take place indicate the volume.

4. Momentum: This measures the rate at which the price of a stock increases or decreases. Thus, it can help you understand whether the ongoing trend in price movements is weak or strong. Generally, momentum indicators work better in bull markets than in bear markets. Also Read Bulls and bears: What do they mean

5. Moving Averages: Price movements can sometimes be very sharp and thus, have an impact on your analysis. When you take the average price over a period of time, then the price trend line becomes smoother. A moving average is more dynamic in nature as it keeps adding the price movement of another day, thereby capturing the latest price information.

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