Technical Analysis

How to read a Technical Chart?

First of all, you should select your preferred asset’s chart. Looking for a Japanese Candlestick Chart is the best way to analyze a specific market, due to the following:

  • Red and Green Candles
  • Opening and Closing Price
  • Support and Resistance

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Candles, Opening and Closing prices:

Basically, a green candle shows a bullish trend in the market price for the specific asset you selected. A green candle has an opening price and a closing price for its lifetime. The bottom part of the candle is referred as the opening price, and the top of the candle is termed as the closing price.

A red candle for instance shows a bearish trend in the market price for the asset. Like the green candle, it also has an opening and a closing price for its lifetime. The upper part of the candle is referred as to be the opening price and the bottom part of the candle is termed as the closing price.

Moreover, the thin line above and below the candles are termed as “Shadows”. A shadow is simply a prediction of the next candle to appear after the current one. If a candlestick has a longer upper shadow than that of the bottom one, the market might speculate that the future candle might be a green one. However, if the bottom shadow is longer than the upper one, it might simply mean that the following candle might be a bearish one.

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Support and Resistance:

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Support line, is the price level which a stock has difficulty falling below. This is the point whereby buyers tend to enter the market for the specific asset. If a stock price falls towards the support level, it might be a test to see if the latter bounces off, or goes even under it.

Resistance line for instance is a line which indicates that the stock or index is finding it difficult to break through it, and may head lower in the near term. A break above the resistance line might push the pair much forward or start a bearish trend.