Once you have opened your Stock Technical Analysis in Australia securities account, you then have access to more than fifty stock exchanges in more than thirty countries. The next question is which stock(s) to buy. Many investors already know in which financial product(s) they want to invest on the stock market. Others prefer to spend more time studying the financial instruments in which they want to invest their money.
When it comes to choosing a stock to buy on the stock market, there are two schools of thought: technical analysis and fundamental analysis. Through this article, you will (re)discover the main concepts of stock market technical analysis, and learn how to use certain graphical analysis tools available on our trading platform. You can also read our article on fundamental analysis in the stock market.
Technical Analysis of Stock Market
Technical analysis does not answer the question “Which stock to buy?” “, but to the following question:” When to buy a share on the stock market? “. For this, it is based on the statistical study of the latest stock market transactions to which the action concerned has been subject.
Technical market analysts don’t ask whether a stock’s price is overvalued or undervalued. Their purpose is to predict the evolution of the financial markets, and therefore to anticipate a future rise (or fall) in the price of the share concerned, according to the history of the last transactions. These are compared to the trends observed on the variation of the share price in the past.
The Different Types of Stock Charts
The Stock Technical Analysis in Australia trading platform gives you access to a wide range of options for customizing stock charts, especially those representing the price history of your shares. For example, you have the possibility to modify the time range, as well as the type of graph. By default, you will see the simple line chart, but you can also set a Japanese candlestick chart or an OHLC (Open-High-Low-Close) chart, which give more detailed information for a given time frame, other than the price of share at the end of each trading session (closing price).
In addition, thanks to a color code, you can easily distinguish positive changes in stock prices (in green) from negative changes (in red), which helps to identify trends. In addition to these charts, you also have the option of overlaying an index, such as the EUROSTOXX 50 or the S&P 500, in order to analyze the price performance of the relevant stock and compare it to that of the benchmark. corresponding.
How to Analyze a Stock Market Chart?
An effective starting point for an investor new to technical analysis in the stock market is to learn some of the patterns commonly seen when studying stock charts. These general directional movements are called trends. It is essential to learn the basics to start with technical analysis, in order to be able to carry out an efficient study of stock market charts.
The uptrend, like the downtrend, is quite easy to identify. If you analyze the price of any stock over a long enough period, you will most likely identify these two trends.
In order to study more complex patterns, it is also interesting to analyze what happens when an uptrend is followed by a downtrend. This is called trend reversals. Sometimes it happens quite suddenly. The graphical representation of the share price is then a V curve. This movement can, on the other hand, also be more gradual.
Stock market movements (up or down) generally evolve around two levels: support and resistance. As the name suggests, support is a price below which the stock price struggles to fall. On the contrary, the resistance level is the price that the stock is struggling to overcome.
One of the technical analysis patterns best known to investors is the figure called “shoulders-head-shoulders” or “Head and shoulders” (ETE). In this setup, the head represents the resistance level that the stock price is struggling to overcome, while the neckline (the dip between the base of the shoulders and the head) represents the support level, as it allows to keep the stock price above a certain level, even after a downtrend.
The Different Indicators of Stock Market Chart Analysis
The trading platform (accessible via your Stock Technical Analysis In Australia securities account) also gives you access to many different graphical indicators, to complement the stock charts representing stock prices. On each product page, you can click on the “interactive chart” button and a new window will open.
The first data displayed is the graph representing the evolution of the share price (top), as well as the trading volume (bottom). Volume is the number of shares traded during a given trading session. The volume is displayed as a series of vertical bars. The higher the bar, the greater the number of shares traded during the relevant trading session. Most investors usually pay close attention to the price of stocks and their other investments, but it is also essential when carrying out any technical analysis of the stock market to take into account the trading volume of the financial instrument concerned.
Some additional features also allow you to note the days when the company issued a dividend, or when its stock was split. But the main focus for those looking to focus on technical factors is indicator selection.
We also provide different indicators of Stock Market Fundamentals Course.