Know the time frame. A bar may represent a day, a week, or even five minutes.

Know what the vertical length of the bar represents. Generally, the length of the vertical bar [...]]]>

Reading bars is one of the most popular methods of charting and financial market analysis, second only to candlestick charting. This method is popular because the simple graphic depiction of the day’s trading makes it easy for traders to identify and predict trends. Here are the basics of reading bars.

Know the time frame. A bar may represent a day, a week, or even five minutes.

Know what the vertical length of the bar represents. Generally, the length of the vertical bar itself indicates frame’s highs and lows, also known as the range of the bar.

Know what the horizontal lines mean. Usually, the a bar will show the opening and closing prices of the market during the given time frame, often with the two prices in different colors.

Know the direction of the bar. This can be gathered from the relationship between the opening and closing price. If the opening price is lower than the closing, then the bar and the market are both moving in an upward direction; if the closing price is lower than the opening, then there is a general downward direction.

As you can see, reading bars is actually very easy. Because no analysis is needed, bars can be produced in very short time intervals, even immediately with the use of software programs designed for this purpose. For this reason, many traders use either bars or candlesticks to identify common patterns so they can act before upturns or downturns actually occur.

There are several ways of calculating a stop-loss indicator, but the most common is to calculate the average range of a given market then [...]]]>

A stop-loss indicator is simply a price level at which traders should sell stock to prevent loss and maximize profit. This indicator varies from market to market and even between long and short positions. Most stop-loss indicators have what is called a ratchet mechanism, which allows the stop-loss level to move ever higher to protect any earnings.

There are several ways of calculating a stop-loss indicator, but the most common is to calculate the average range of a given market then multiply it by a factor developed from the stock’s previous highs. The ratchet mechanism is integrated into this number so that it changes from day to day, getting higher as the stock’s value rises. The ratchet mechanism also can lower the stop-loss indicator if the stock is gradually losing value, allowing short position traders to protect gains.

The stop-loss indicator is valuable because it allows traders to set a threshold below which they will liquidate their stock. This takes a lot of guessing out of the job of analysis and trading. The ratchet mechanism moves the stop-loss indicator up and down so that the threshold changes with the market conditions and fluctuations.

One important thing to know about stop-loss indicators is that they are indicators, not mandates. Traders may decide to liquidate assets before the price reaches the low of the indicator; conversely, they may decide to hold on to a particular stock even if it dips below the threshold denoted by the indicator. The stock market is a complicated market, so stock analysts look at a variety of factors when making important decisions.

Chart indicators basically give traders that watch them an indication of the direction of prices in the future. They may indicate prices increasing, decreasing, or stagnating. Based [...]]]>

Chart indicators are patterns or moves that a trader uses to gauge future movement in the stock market. These may be based on a stock’s opening price, closing price, or the volume of trading between the two points. Most analysts have a few favorite indicators that they particularly trust and thus rely heavily upon.

Chart indicators basically give traders that watch them an indication of the direction of prices in the future. They may indicate prices increasing, decreasing, or stagnating. Based upon this, traders may buy or sell the stock in question to maximize their profit. Here are a few indicators that are watched for by many traders.

RSI: The Relative Strength Index compares the rise and fall in prices to past performance. This is one of the more common indicators.

Stochastic Oscillator: This indicator compares the closing price of a commodity to the price range of a specific time period. The price range can vary depending on which time interval you choose, and thus so can this indicator.

Moving Average: This indicator attempts to distill important information by taking several different averages of several different sets of information.

MACD: This stands for Moving Average Convergence/Divergence and uses the moving average information to form a line against which real time stick information is compared. This often can pinpoint trends before they happen.

These are just a few of the indicators commonly used by stock analysts. As you can see, there are many chart indicators, each with its own benefits and drawbacks. Deciding which are best for you is a very personal decision, but one that every trader must make in order to find success in a competitive market.

There are a few factors that go into creating market [...]]]>

A popular saying on Wall Street that describes market sentiment is “all boats float or sink with the tide.” Market sentiment is a broad term that describes the way investors are feeling as a whole. Market sentiment can push prices higher than ever or bring them down to unprecedented lows. It has a huge effect on every single stock, so understanding and predicting it is important for traders at every level.

There are a few factors that go into creating market sentiment. First, national and global events will affect the mood of investors as a whole. Second, analysis and data also are thrown into the mix. In general, market sentiment is described as being either bullish or bearish, with bullish sentiment driving up prices and bearish ones pulling them down.
Many people attempt to identify the current and future market sentiment by charting several key commodities or by simply charting daily averages, taking relevant developments into account as well where necessary. This is a good way of seeing where the stock market is headed in general, although not an effective means of predicting the movement of any individual stock.

Because market sentiment is diverse and difficult to analyze, there are almost as many means of measuring it as there are traders. However, most people only need to remember one key fact: that market sentiment affects the trading of individual stocks and thus should be taken into account every single time you buy or sell. The stock market is full of people, and market sentiment is a description of how they are feeling that day.

One of the first and foremost rules of identifying crowd behavior is that people will follow each other. Known as the [...]]]>

Identifying crowd behavior is important for anyone working with people on a mass scale, but no one as important as stock traders. It is well known that people will copy each other and move together in the same direction, but it is the science of identifying this crowd behavior that is very important in making money in the financial markets.

One of the first and foremost rules of identifying crowd behavior is that people will follow each other. Known as the bandwagon effect, for traders this means that if a few people begin selling a stock, driving down the price, other people will further lower the price by selling. This is known as distribution. Similarly, if several people are buying, many people will follow them. Traders that can identify these trends before they get into full swing are clearly at an advantage. This is called accumulation.

Another basic concept of crowd behavior is that a price cannot rise beyond a certain point before people simply will not buy in. In financial markets, this is called going too far or being overbought. The market will them move in the opposite direction, a process known as a correction.
These are just a few of the basic principles of identifying crowd behavior. Experienced market traders must be very aware and even wary of crowd behavior, adjusting their decisions to buy and sell according to their predictions of how many people will act. If you learn to identify and predict crowd behavior, you will be at a huge advantage in the financial world.

In general, there are two main trends that are noted by market [...]]]>

Trends can be defined as the course of a market, whether it is upward, downward, or even sideways. Every market, whether it is fashion or food, has trends and the financial markets are no exception. In the case of financial markets such as the stock market, trends are significant because understanding them can increase profits and decrease losses for traders and everyone with money in the market in question.

In general, there are two main trends that are noted by market analysts: bull trends, which imply a market with a price moving upward, and bear trends, which imply just the opposite. Generally, no trend is forever; a market that is moving upward will eventually reach a ceiling and move downward, while a down market eventually shifts and moves upward once again.

The key to market analysis is identifying these trends during the actual shift, so this information about the future can be used to maximize profits and minimize losses. In general, one should buy when a stock is low and about to move upward, while selling when a stock is at its uppermost point and about to turn downward.

During a bullish market, bear movement is far less than bull movement. While a particular company may be moving downward, in a bullish market it is likely to rebound rather quickly. Competent analysts look not just at the trends of a particular company, but the trends of the overall financial market for complete picture of what is happening. Like all markets, the financial market moves in cycles, so getting in tune with these trends and learning to analyze them puts a person at a huge advantage when it comes to profiting from the stock market.

The oldest known form of technical analysis is known as candlestick analysis. Once used to predict rice prices, candlestick analysis is a method invented in the early eighteenth century. It remains one of the main methods of predicting stock prices [...]]]>

Technical analysis is a way of using market data to predict the future of the stock market. Many of the principles of technical analysis have been developed over several hundred years of watching the stock market and other markets as well.

The oldest known form of technical analysis is known as candlestick analysis. Once used to predict rice prices, candlestick analysis is a method invented in the early eighteenth century. It remains one of the main methods of predicting stock prices today.

Another common form of technical analysis is known as Dow Theory, which was invented by Dow Jones founder Charles Dow. This technique is considered the precursor to many modern techniques. Elliott wave theory is another common technical analysis technique. However, in the recent past, more and more technical analysis has been performed by computer programs specially for the job.

Regardless of the type of technical analysis, the intent is the same: to identify trends in the stock and other financial markets, and to use these trends to predict the rise or fall of the market in question. Many of the people who employ these techniques will look for patterns such as the head and shoulders reversal pattern or flags.

People who employ technical analysis are generally known as market analysts. Because there are many schools of technical analysis, many traders are familiar with a variety of techniques and use them all to get a comprehensive picture of where the market is at and where it is headed. However, there remain many traders who are loyal to a single method.