The following points will explain how to make use of different types of indicators, support level, resistance level etc.

If proper technical analysis is done then the investment strategies will improve drastically.

This article has all basic terms of technical analysis but this will give you better idea of the share market but if you are interested to know more about technical analysis then drop an email to us at

Charts

Line Chart and Candlestick Chart

As shown in the chart the single line represents the stocks closing price on each day. Dates are displayed along the bottom of the chart and prices are displayed on the side(s).

Line charts are typically displayed using stocks closing prices.

These type of charts are the most popular type of all charts.

As shown below the top of each vertical bar represents the highest price of the stock and the bottom of the bar represents the lowest price of the stock it reached on that day. A closing price (last price) is displayed on the right side of the bar.

The red bar indicates that stock has closed lower then its open price and white bar indicates that the stock has closed above its open price. At the bottom you can see time frame.

Generally, stocks comes to support and resistance points and get constant before further movement and further movement either down side or upside depends on buyers expectation and other technical aspects.

The breaking of support and resistance levels can also be triggered by fundamental changes, and that is up to investor expectations (fundamental changes like changes in profits, expansion, takeover, management etc).

The supply is the number of shares that sellers are willing to supply (sell) at a given price.

The demand is the number of shares that buyers are willing to buy at a given price.

The investor expectations keeps on changing and so do the prices of stocks.

A breakout above a resistance level is evidence of an upward move as more buyers (demand) are willing to buy at higher prices. Similarly, the failure of a support level indicates that more supply (seller) is available and ready to sell at lower levels.

The Basic foundation of technical analysis tools is in the concept of supply and demand. So Charts provide us the best view and analysis of these levels in action.

In such scenarios one of the two things can happen. Either the stock prices will move back to their previous level OR investors/traders will accept the new price and the stock price will keep moving up in the direction of breakout

Conversely, if the breakout is on moderate volume and the traders regret period is on increased volume then this indicates that very few investor expectations have changed and hence return to the original price.

Changes in price are the result of changes in investor expectations of the stocks future price.

In this TRENDS section, we will see what is trend and how it influences stock prices.

A trend represents a consistent change in prices. A trend is different from support/resistance levels. Trends represent change, whereas support/resistance levels represent barriers to change.

The break out takes place when investor’s expectations change in support with increase in volumes.

As in support/resistance, in trend lines also Volumes plays a major role in continuing the trend or in break out of the trend.

Nowadays you get moving averages readily available on most of the websites.

To brief you moving average is calculated by adding the closing prices of a stock for most recent 15 days and then dividing by 15 the result what you get is the 15 day moving average.

Conversely, if today's price is below then its 25 day moving average, it shows that current expectations are below average expectations over the last 25 days and this may bring stock price lower.

The moving average is used to observe changes in prices. Investors typically buy when a stock price rises above its moving average and sell when the price falls below its moving average.

The RSI is another one of the most used and well-known leading momentum indicators in technical analysis. The main use of RSI is used to find whether the stock is overbought or oversold.

The RSI indicator is plotted in a range of between 0 and 100. If RSI is reached above 70 then it is considered that stock is overbought and if it reaches below 30 then it is considered that the stock is oversold.

The bullish signal

To put more light, have a look on following chart.

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There are hundreds of indicators but in this section we will discussed the indicators which are most widely used and important ones.

This indicator is based on moving averages

Red line is short term moving average and blue line is long term moving average.

When the short term moving average crosses above the long term moving average (as shown in following chart) in the

When the short term moving average crosses below the long term moving average (as shown in following chart) in the

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