3 Most Important Topics You Should Know When Starting in the Stock Market

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.

Topics to know when Starting in the Stock Market

1. SUPPORT & RESISTANCE

What are Support and Resistance?

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.

2. HORIZONTAL LINE

What is the Horizontal Line?

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.

How to draw a horizontal line?

1. First, you need to spot a past price-level where the price had difficulties to break above or below.
2. Then mark it with a horizontal line and Adjust it so that you get the highest number of touches (whether it’s body or wick).
3. Once the price approaches this horizontal line again, there is a high chance that the price will retrace from that line.
   

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3. TREND LINE

What is a Trend line?

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

1. Upward Trend Line: “Sloping” area on the chart that shows upward buying pressure.

1. Downward Trend Line: “Sloping” area on the chart that shows downward selling pressure.

How to draw a trendline?

1. First, you need to spot an angle either upwards or downwards where you can see the price has taken support or had a resistance
2. Start drawing a line from the lowest candle
3. Adjust it so that you get the highest number of touches(whether it’s a body or a wick)

You can also read about 7 CANDLE STICK PATTERNS you Must Know Before entering into Stock Market for a better understanding of this.

If you want to know more about Risk Management & Intraday Trading Strategies you can refer to our previous blog on

Importance Of Risk Management In Trading and 10 Best Intraday Trading Strategies.

Open a Demat Account using our link to get support from us – https://bit.ly/3gyhIWN and send your ID to [email protected]

Happy Learning!