Day trading strategies: the complete guide with all the advanced tactics for stock and options trading strategies. Find here the tools you will need to invest in the forex market
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Support and Resistance
Over relatively short time periods, stocks will stay confined between a range of prices. The low pricing point of this range is called support. The upper price point of the range is called resistance. The trader seeks to enter their position at a point of support. They can also place a stop loss order slightly below support so that they will exit the position if they bet wrong and share prices drop substantially. Then they can sell their stocks when the share price gets close to resistance levels, on the theory that it’s more likely than not to drop back down after reaching resistance. The chart below illustrates this concept. Notice, however, that the stock eventually breaks out of the range. In this case, it’s the support on the right side of the chart, and the price drops significantly. Candlesticks A candlestick is a graphical representation of price and trading that occurred over a specified time period. Candlesticks have a body, and “wicks” sticking out of the ends. On most stock charts candlesticks are in color, with green representing a “bullish” candlestick and red representing a “bearish” candlestick. A bullish candlestick is a time period where buyers were moving into the market buying up shares. The bottom of the body indicates the opening price for the period, and the top of the body indicates the closing price. A bearish candlestick represents a time period of decline in price. In this case, the top of the candlestick body is the opening price, and the bottom of the body is the closing price. In either case, the top wick of a candlestick represents the high price throughout the time period. The bottom wick represents the low price for the time period. You can choose what time period you want to be represented, from one-minute out to one year. In the example below, we view the JNK chart but using candlesticks instead of a line. This is with one-day intervals. So the chart tells us whether or not it was a bullish or bearish day, and the sizes of the candlesticks indicate the spread in opening and closing prices for the day. Traders will look for certain patterns in candlestick charts that indicate changing trends. For example, if the share price has been dropping for a long period, and a large bullish candlestick suddenly appears, that can indicate that buyers are now entering the market, pushing up prices. The trader will confirm the signal by looking up the volume of trading and comparing that to the average. A high-volume trading day is a strong indicator that the price will probably move up. Alternatively, if the price is at peak value, and there is a bearish candlestick with higher than average volume, that tells us that traders are selling off their shares in droves, and a drop in price is probably coming. Download 1.65 Mb. Do'stlaringiz bilan baham: |
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