Using Stock Trading Charts For behalf - 5 Easy Tips

Asset - Using Stock Trading Charts For behalf - 5 Easy Tips

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Stock trading charts are a vital part of any stock trader's armoury, and this record will give you 5 tips on how to use them for profit.

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1. Only use charts to confirm what your investigate tells you.

Some traders boast that they can look at any chart and tell what it's going to do next. The only trouble is that they get it wrong nearly as often as they get it right. The factors that sway a stock's price can cause it to take off in either direction at any time, no matter what it has been doing recently.

Charts alone are treacherous. Even traders who use them extensively also have their ear to the ground to keep abreast of developments affecting the price of stocks they have a stake in. Learn as much as you can about the stock you're curious in trading.

Research the company, what it produces, what its main markets are, what problems it is facing, and what projects it has in the pipeline. This isn't too difficult as most of this can be found online. Once you've discovered stock that is under or over valued then consult the chart.

2. Interpreting chart patterns

Patterns on charts often exist only in the trader's imagination. Only give any weight to a pattern if it jumps off the chart at you. Don't try and levy any that aren't there. The main pattern to look for is a trend - higher lows or lower highs. If you can find just one or two established trends each week that you profit from then you'll do well.

Other patterns include the "head and shoulders", the "double top" and the "double bottom". If you see either of the first two on a modern chart then there's a strong probability that the current movement is ordinarily downwards. The "double bottom" indicates that the price has probably reached as low as it's likely to go prior to exciting up again.

3. Establishing resistance and retain levels

These are imaginary lines on stock trading charts indicating where the price is unable to rise or fall further. They may not necessarily be horizontal - sometimes they can be shown to slant up or downwards. If the price is exciting fairly rapidly towards such a line there is a strong possibility it will breach that line and move into a new trading range. Often the line breached becomes its opposite, i.e. Resistance becomes the new support, or retain becomes the new resistance.

If the price is exciting moderately towards such a line it's a sign that the price will probably not move much supplementary in that direction and is more likely to reverse.

4. Deciding on your stop loss and profit taking levels

This is where a chart literally comes into its own. If your stock store graph shows a clear trading range surface of which the price rarely goes, then you can set your stop loss and profit taking levels with confidence. This works with medium to long term trading only, where you have adequate capital to afford adequate stop loss levels. It can't be relied on in day trading, where stop loss margins are necessarily narrow and quick profits are sought.

5. Accept their limitations

If you accept that charts aren't a crystal ball to see into the future, but are simply an aid to production trading decisions, then you will avoid production the mistakes that unsuccessful traders make. Those mistakes are usually caused by greed and fear, the two famous factors fueling price movements in the stock market.

In short, stock trading charts are a priceless asset to any prosperous financial trader in case,granted you know how to use them and don't substitute them for doing your homework.

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