BQLearning: Technical Analysis For Beginners

BQLearning is a special show that seeks to demystify financial markets, economic theories, legal processes and political structures.

In this series, we explain how technical analysis works; how to identify trading opportunities through it and decode various concepts associated with it.

Technical analysis is a tool that helps to identify trading opportunities. It helps traders simplify the decision-making process while considering price and volume action on an underlying stock.

What’s A Trendline?

It helps to identify the current trend of a stock or an index. A trendline is drawn by connecting the high and the low points of the stock price movement over a defined time frame.

Uptrends are characterised by higher high and low points, while downtrends by lower high and low points. Understanding the trend is very important in technical analysis as going against the trend could sometimes mean being exposed to unnecessary risks.

What’s A Price Range?

It’s a price band in which the stock tends to move. It could be an intra-day price range or a range over a period of time. The price range can also be narrow or wide. Trading using technical analysis is usually favourable in a wider price range.

What’s Volume Confirmation?

Another crucial element while viewing price charts is the volumes supporting the price move. Technical analysis involves both price and volume. Any price action supported by higher volume signifies conviction. The higher the volume, more significant is the move.

What’s A Target?

A target is an anticipated price of the stock where a trader is looking to book profits.

What’s A Stop Loss Order?

A stop loss order is placed with a broker to sell/buy a security when it reaches a certain price. Stop loss orders are designed to limit an investor’s loss on a position in a security.

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