Learning stock analysis for beginners can be very helpful when it comes to investing. One of them is technical analysis, a method of analysis that helps make desired buying and selling decisions in stocks. If you are currently starting to learn technical analysis of stocks, here are some analyses that you should master.
Technical Analysis of Stocks to Master:
1. Learn Basic Candlesticks
Candlesticks are a technical analysis tool that you must understand. By understanding the basic candlesticks, you will be able to identify trends, support and resistance levels, as well as bullish and bearish patterns in a stock. Candlesticks are the primary stock chart derived from a specific time period.
What needs to be understood here is the meaning of green candlesticks, the meaning of red candlesticks, opening price, high, low, and closing price. Start by understanding these basic points before learning indicators or reading charts. Otherwise, you will have difficulty understanding the rest if you do not grasp the basic candlesticks.
2. Understand Bid-Offer
Another important aspect of technical analysis for beginners to understand is the bid-offer or the order book in stocks. You can learn this after understanding the basic candlesticks mentioned in the first point. Understanding bid-offer is something that should not be overlooked.
Unfortunately, many novice traders dive straight into learning to read charts without first understanding what the bid-offer queue in stocks is. However, traders must enter the correct price queue in the bid-offer when trading. As a result, they remain confused about how to buy and sell stocks. That's why when learning technical analysis, it is important to understand the bid-offer.
3. Understanding Trends and Support Resistance
Once you have grasped the basics of candlestick patterns and bid-offer, you can start learning to read charts. Stock charts will serve as your tool for analyzing stocks and determining whether a stock is likely to go up, down, or sideways. On the chart, red horizontal lines and square symbols indicate support and resistance levels.
A support line is the lower boundary of a stock's price, while a resistance line is the upper boundary of a stock's price. You can determine these support and resistance levels by manually drawing horizontal lines and identifying the closest points to the stock's price. In beginner's stock technical analysis, it is important to master the process of determining these support and resistance levels in order to identify buying points.
4. Understanding Trading Indicators
Next, you need to understand trading indicators. There are various types of trading indicators, and they can generally be divided into two major categories: leading indicators and lagging indicators. These two indicators are commonly used and are said to provide signals for buying and selling stocks.
Leading indicators are indicators that precede stock price movements. In other words, leading indicators provide early buy or sell signals. On the other hand, lagging indicators are indicators that trail behind price movements. They are effective when used during a stock's strong trend-building phase.
Which one is better between leading and lagging? The best approach is to combine both. Stocks can continuously change in price, so sometimes you will need leading indicators, and other times you will rely more on lagging indicators.
5. More Complex Technical Analysis
Once you have understood the first four points, you can delve into more complex technical analysis. This involves learning about candlestick patterns and chart patterns. Candlesticks formed on a chart can appear in various patterns such as hammer, inverted hammer, doji, and many others.
After going through the basics of technical analysis for beginners, you have the opportunity to develop your understanding of technical analysis further. Memorizing every candlestick pattern is unnecessary since there are numerous patterns that exist. In fact, you can even develop your own patterns once you become proficient. Therefore, the key is to understand them.
Mastering technical analysis cannot be achieved instantly. It requires gradual learning to gain a proper understanding. Take it step by step, starting with the basics. By doing so, you will be able to develop your own technical analysis to identify the potential ups and downs of stocks and make informed buying decisions.
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