Topics to Study about Trading in Market

Learn about the basics of trading before doing trading in market so that your decision could be based on rationality rather than guesses. Trading in market is not an easy task, here are some basic topics you must know to get edge over the other traders.

Sr. No.TopicExplanation
1.CANDLESTICK PATTERNSA candlestick chart’s daily price movement information is represented graphically by candlestick patterns, a tool for financial technical analysis.
2.CHART PATTERNSWhen prices are graphed, a chart pattern or price pattern is a pattern within the chart.
3.TREND LINESThe use of trend lines is crucial for both trend identification and trend confirmation because technical analysis is based on the premise that prices move in a trend.
4.Support & Resistance AREASWhen placing Buy orders to go Long, traders scan the market for areas of support. They also set a Target for a Short position in the Support area. Resistance is a price or a price range where the market finds it difficult to move above.
5.KEY LEVELSSimple horizontal areas of support or resistance constitute key levels. This indicates that the price graph’s peaks and valleys correspond to a horizontal psychological barrier. Technical analysis relies heavily on the concepts of support and resistance lines.
6.ZONESWhen a security’s price drops to a forecasted low, also referred to as a support level, it enters a zone of support. An area of support is a lower limit that the stock has not yet crossed. A zone of support offers areas with a high likelihood of trend reversal or continuation.
7.CONFLUENCEConfluence is the coming together of various ideas and strategies into a single, comprehensive strategy. Confluence occurs when two or more distinct concepts or methods are combined to create a thorough investment plan that is consistent with the objectives and risk tolerance of the investor.
8.MA’S/EMA’SA moving average (MA) is a stock indicator that is frequently used in technical analysis. It creates a continuously updated average price to help smooth out price data.
9.FIBONACCIFibonacci retracement levels in technical analysis highlight critical areas where a stock may reverse or stall. Typical ratios include things like 23.6%, 38.2%, and 50%. These, which are intended to forecast the direction of a security’s price movement, typically take place between a security’s high and low points.
10.ICHIMOKU CLOUDA type of chart called the Ichimoku Cloud is used in technical analysis to show trend, momentum, and support and resistance all in one view. Similar to moving averages, TenkanSen and KijunSen are compared to one another.
11.MOMENTUMInstead of measuring price levels directly, momentum measures the speed at which prices change. Price differences are continuously recorded for a predetermined amount of time to determine momentum. You would deduct the most recent closing price from the closing price from 10 days ago to create a momentum line for a 10-day period.
12.MACDAn oscillator of momentum, the Moving Average Convergence/Divergence indicator is primarily employed in trend trading. Despite being an oscillator, it is rarely used to spot overbought or oversold conditions. It appears as two lines that oscillate without boundaries on the graph.
13.RSIJ. Welles Wilder created the Relative Strength Index (RSI), a momentum oscillator that gauges the rate and variance of price changes. The RSI fluctuates between zero and one hundred. The RSI is typically regarded as overbought when it rises above 70 and oversold when it falls below 30.
14.STOCHASTIC/RSIWhen a stock has shifted into an overbought or oversold position, stochastics is used to show it. The mathematical number that appears most frequently in the time mode is fourteen. It may stand for days, weeks, or months, depending on the technician’s objectives.
15.SUPPLY/DEMANDThe law of supply and demand is a theory that aims to explain the connection between a product’s price and its availability and demand, such as in the case of a security. In general, low availability and high demand increase an item’s price while high availability and low demand lower it.
16.ELLIOT WAVETechnical analysis techniques like the Elliott Wave Theory search for recurring long-term price patterns linked to enduring shifts in investor psychology and sentiment. According to the theory, there are impulse waves that initiate patterns and corrective waves that run counter to the main trend.
17.RISK /REWARDThe risk/reward ratio shows how much an investor might gain from an investment for every dollar they risk. The expected returns of an investment and the level of risk required to earn those returns are often compared using risk/reward ratios.
18.DIVERGENCEDivergence occurs when an asset’s price moves in the opposite direction from other data or from a technical indicator, like an oscillator. Divergence signals that the price trend may be waning and, in some cases, may even result in a price reversal.
19.BREAKOUTSA breakout occurs when a stock price moves with increased volume outside of a clearly defined support or resistance level. When a stock price breaks above resistance or below support, a breakout trader opens a long position, and when they do the opposite, they open a short position.
20.FUNDAMENTALSKey performance indicators for a company include cash flow and return on assets, or ROA (ROA). Fundamental analysis is frequently used by analysts to examine a stock’s fundamentals and analyse it. This entails taking a close look at any information that may have an effect on the stock’s price or perceived value.
21.MASTER CANDLEWhen an asset’s price is fluctuating within a range, a master candle forms. Four subsequent candles all open and close inside the first candle’s body (or the MC, engulfs the opening and closing of the four following candles).
22.RETEST METHODCollins claims that a retest occurs when a stock price breakout is followed by a trend reversal and a return to a predetermined price range, such as the region surrounding its 21-day simple moving average. Typically, it settles back into the price range it was in prior to the breakout.
23.TOKYO BREAK
24.NEP TRADING
25.TREND FOLLOWINGAssuming that price trends tend to hold, trend following is a systematic investment strategy that looks to profit from long-, medium-, or short-term market trends.
26.MAJOR REVERSALSA price trend reversal occurs when it swings from increasing to decreasing or vice versa. Prior to a reversal, traders try to exit trend-aligned positions; alternatively, they exit once they notice the reversal is happening.
27.PIVOT POINTSChartists can use pivot points to identify intraday levels of support and resistance. Pivot Points calculate a Pivot Point for the current day using the Open, High, and Low from the previous day.
28.SCALING INSetting a target price and investing in volume as the stock falls below it is referred to as scaling in. Purchasing keeps going until either the price stops dropping or the intended trade size is attained.
29.ATR STOPLOSSATR is a metric for volatility over a given time frame. The most typical length is 14, which is also a typical length for oscillators like the stochastics and relative strength index (RSI). A more volatile market is one with a higher ATR, whereas one with a lower ATR is less volatile.
30.PSYCHOLOGYMarket psychology describes the typical actions and overall sentiment of market participants at any given time. Financial media and analysts frequently use this phrase to explain market movement that may not be explicable by other metrics, such as fundamentals.

RELATED ARTICLESMORE FROM AUTHOR