When it comes to trading in the Indian stock market, technical analysis is vital tool traders use to make informed decisions. However, for many traders, technical analysis can seem like a daunting task.
This blog post will provide tips on how to learn technical analysis for the Indian stock market.
What is Technical Analysis?
Technical Analysis (TA) is a field of endeavor in finance wherein traders and investors attempt to forecast future prices and trends by analyzing past patterns in price data.
It is one of several methods investors and traders use to assess where prices may be headed in the future, with the ultimate goal of making profits from buying and selling stocks or other securities.
Below are some of the essential concepts of Technical Analysis:
Trends
Support & resistance
Technical indicators
Different chart patterns
Candlestick Patterns
Price Action
Trends
Charles Dow developed the concepts of different types of trends in his Wall Street Journal editorials. As per Dow, all market-related information – past, present, and even future is discounted and reflected on the charts.
As per Dow, market movements can be divided into three types, and these three types are:
Uptrend,
Downtrend, and
Sideways
Support and Resistance
Support and Resistance are key price levels where major bulls or bears battle with each other to give a decisive move in one direction.
When the prices of stocks drop, demand increases which causes their value to rise. This creates a pause in falling trends and forms what's known as support lines at various levels depending on the keen interest of buyers.
Resistance is the price level at which selling is assumed strong enough to prevent the price from rising. At this level, sellers are more inclined toward selling and buyers are less inclined toward buying.
Technical Indicators
Technical indicators are a great way for beginners in the stock market to bring some discipline and avoid unnecessary trades.
They also help Algo Traders design mechanical systems that manage their work more efficiently, all while remaining within an algorithm's programmed parameters.
Technically all the technical indicators can be divided into four types, as shown below:
Trend Indicators (moving average, MACD, etc)
Momentum Indicators (RSI, Stochastics, etc)
Volatility Indicators (Bollinger Bands, ATR, etc) and
Volume Indicators (Volume Profile)
Read this to understand the popular indicators in stock market trading.
Different Chart Patterns
Chart patterns are an important part of technical analysis that many traders use to identify where a particular asset might go next.
They're recognizable shapes you'll see on price charts, like trends or consolidation regions - but they don't always 100% predict what happens next!
There are hundreds of chart patterns in technical analysis. Below are some of the crucial chart patterns.
Candlestick Patterns
The candlestick patterns are a powerful tool for traders to use when they are trying to figure out what might happen in the markets.
There are several different types of these patterns, each one meaning something specific like bearish or bullish signals - knowing how many there were can give you an idea about where investor sentiment currently stands!
Below are some of the important candlestick patterns:
Good Indian Books to Learn Technical Analysis
When it comes to learning about the stock market, there are a variety of different sources that you can turn to. You can find information on TV, online, and in books.
If you're looking for a good book to learn about technical analysis for the Indian stock market, then look no further than this list.
In these five books, you'll find everything from introductory information to more advanced techniques. So whether you're a beginner or an experienced trader, there's something here for you. So dive in and start learning!
(All are paid links)
Free Technical Analysis Courses
Participation from big players always gives a big move in any stock or index, and hence following them is always a good idea to get profitable trades.
If you want to learn more, then you can try the course' Beginners Guide to Stock Market Trading'
Have you ever taken a chart in Tradingview and:
Removed all of the Moving Average (MA), Bollinger Band (BB), and PSAR indicators?
Removed all the underlying indicators like RSI, Stochastics, MACD, and ADX?
Do you think you would be able to trade? some traders may ask how to trade in the stock market then?
It might look impossible, but don’t forget most of the indicators derive their existence from one thing – ‘PRICE.’
A fluctuation in the price will also bring variations in those indicators. Isn’t it?
Then which is better to study? The PRICE, or Indicators? one can think for some time.
You can learn more about price action trading from this course.
Software for Technical Analysis
Nowadays, most websites provide all the advanced features of charting, scanners, and backtesting. For example, Tradingview, Gocharting, Chartink, Investing, Icharts, Moneycontrol provides most of the technical analysis features.
If a trader is keen to learn more, then the below software is beneficial.
Amibroker – For backtesing and algo trading
Ninjatrader – For backtesting and trading
Metatrader – For backtesting and trading
eSignal – For indicator development and trading