As we discussed earlier, 7 CANDLE STICK PATTERNS you Must Know Before entering into Stock Market, today we are going to let you know the 3 important topics that you should know when you are starting in the Stock Market.
This is a concept in technical analysis that says that the price of a stock tends to stop and move in the opposite direction when it hits certain pre-determined price points.
Support level: This is a level at which the price of a stock does not fall down any further. The price is likely to bounce back and moves up in the opposite direction. This is a level where the demand from buyers is expected to be much higher than that of sellers.
Resistance level: A resistance level is the opposite of a support level. It is a price point (ceiling) at which the stock price is not expected to rise any higher. This is a price point at which there are more sellers than buyers in the market for the particular stock.
Breakouts in levels:
The support and resistance levels give the trader an idea about the price movement of a stock. However, it is entirely possible that the stock price breaks through these levels. And when this happens (as it often does), a new support and resistance level is created.
That is, if the support level is breached, the price of the stock continues to fall until it reaches a new support level. And if the resistance level is breached, the price of the stock continues to rise until it reaches a new resistance level.
The concept of support and resistance helps traders identify and exploit trends in the stock market.
However, this does not mean that the stock will never go beyond a support or resistance level. A stock price can always go higher or lower. And as a trader, you shouldn’t rely solely on these levels to make trades.
A Horizontal Line shows the horizontal level in the chart. It can act as both Support and Resistance levels. Moreover, with the use of a horizontal level or line, you can easily decide whether you should exit a trade. That’s because the horizontal level in the chart can help you figure out where a change is going to take place in the trend.
TREND LINE : Just like a horizontal line, there is a trend line and the only difference is a trend line is in a sloping direction
There are two types of trend lines
You can also read about 7 CANDLE STICK PATTERNS you Must Know Before entering into Stock Market for a better understanding of this.
Want to know more about Elite Trader Program?