CHART TYPES
Technical analysis of publicly traded assets recognizes two basic types of charts:
Line chart and Candlestick chart
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Description of the candle
The candle consists of a body and two drooping protrusions (called shadows). The body of the candle shows the difference between the highest and lowest price for a given period and the color of the candle indicates whether the price has risen (green candle) or fallen (red candle).
The candles then show the price range between the highest and lowest price during the period and the opening and closing prices. This information allows investors to better understand price movements and identify potential trends.
Investment signals
Investment signals are information for making investment decisions. These signals can be obtained from price charts, technical analysis, fundamental analysis, and other sources. They help investors determine whether to buy, sell or hold a particular stock.
Some of the most common signals that help investors read investment signs include:
1. Trend lines: these lines are used to determine the trend of price movements. Trend lines help investors recognize whether a stock's price is rising, falling or in balance.
2. Support and Resistance: These terms refer to price levels that could prevent the price from rising or falling further. These levels can be determined by trend lines or past price highs and lows.
3. Formations: these formations, such as head and shoulders and triangles, help investors identify potential reversals in the price trend. These formations occur on charts and are made up of specific patterning of price movements.
Trend line
The trend line may reveal the following two investment trends:
1. A rising trend: If a trend line is drawn on a chart with rising prices, it may indicate that the asset in question is trending upwards in price. This can be a signal for investors to buy that asset.
1. Declining trend: If a trend line is drawn on a chart with declining prices, this may indicate that the asset is trending downward in price. This may be a signal for investors to sell that asset.
Resistance & Support
Resistance and support are terms used in technical analysis and are used to identify price levels where the price of an asset could stop rising or falling.
1. Resistance: Resistance is the price level where the price of a given asset is expected to encounter resistance and be unable to rise further. If the price reaches the resistance level, some investors may sell, driving down the price of the asset.
2. Support: Support is a price level where the price of the asset is expected to remain or fall only slightly. If the price reaches the support level, some investors may buy and increase the price of the asset.
