Share market experts rely on two analysis before selecting a share for investment. One is technical analysis, in which a share's movement of price and volume is studied over years and they try to strategize the movement. Another is the fundamental analysis in which they study about the company associated with that share, its sector growth etc.
However a genuine investor cares more about fundamental analysis of a company because the price of a share can be manipulated to go up or down. if this there on one side ,as I already said nowadays information about company and sector performance reaches all at the same time through media ,fundamental analysis also became a more common feature known to all experts.
So sometimes, a common man who is a regular observer of market is able to set good portfolio for himself when compared with experts. In this article I will just take you through certain basics of technical analysis.
Candlestick representation of a stock price movement within a day:
A share when traded will be subjected to four price levels:
- Opening Price: The price at which the first trade is done or the market opens
- Closing Price: The price at which last trade is done or When the market closes.
- Intra-Day High: The maximum price the share was traded for the day.
- Intra-Day Low: The minimum price the share was traded for the day.
This is simple ideal graph by which I am trying to explain you all the simplest way of predicting and investing. The share price is plotted for various days in a graph as shown above. Using statistical tools the trend line is derived. It will be observed that prices follow a particular pattern. Assume that you are close to level 4 of the graph. Since you know the price is going to rise after that you can buy the stock. The bottom vertical projections from x –axis indicate the volume of trade, usually at these points volume will be more because of buying. Similarly it is the reverse when you are point 3.this is the simplest way of understanding and in further articles I will take you to depth.
Prabhu.s
KIAMS
