If you’re interested in getting into the stock market, then you should know that trading charts are one of the most important pieces of information available to you. They can not only help you with intraday trading, but also investing as well. Wondering how, in this article, we’re going to take a look at just that. But before we go ahead, let’s first quickly take a look at what trading charts are.
Charts that display price and volume information on stocks or any other asset classes for that matter, are termed as trading charts. There are multiple different trading charts available such as bar charts, candlestick charts, and line charts, among others.
However, when it comes to online trading, traders and investors tend to rely more on candlestick charts to help them make trading decisions. This is primarily due to the fact that such charts give you information on a stock’s opening price, closing price, the day’s high, and the day’s low.
As you’ve seen above, trading charts provide individuals with a host of information about an asset. But then, how does that help? Check out the three primary ways in which they’re of assistance to those involved in online trading.
1. Gives you information future price movements
As the price of an asset changes over time, trading charts, especially candlestick charts, make certain patterns. Traders and investors use the appearance of these patterns to predict what the future price movement of that particular asset is likely to be in the future.
By getting to know what the future price movements are likely to be, investors and traders can take positions accordingly. That said, to be able to make predictions accurately, you would have to first get to know and recognize chart patterns.
2. Gives you information on entry and exit points
Analyzing trading charts can help you determine what the support and resistance levels for an asset are. This information on support and resistance levels will allow investors and traders to easily determine what the ideal entry and exit points for intraday trading and investing should be.
For instance, if a trader manages to spot a support level through the help of a trading chart, they can use that information to place an entry trade. Similarly, if a trader manages to spot a resistance level, they can use that information to place an exit trade.
3. Helps you decide the stop loss point
Just like how trading chart patterns help you predict future price movements, they can also assist you when it comes to placing the stop loss point for a trade. As you’ve already seen above, by analyzing the charts of an asset, you can find multiple support points for an asset. These support levels can be used as a good stop loss point for your trades, protecting you from further downsides in that asset.
When it comes to online trading, charts are indispensable in nature. That said, before you go ahead, it is advisable to get to know more about the different charts and how they work. Also, to participate in the stock market, you would need a demat and a trading account. If you don’t have one already, get in touch with Motilal Oswal to open a demat account for free within just a few minutes.
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