Technical analysis of stocks for beginners - Types of charts | Support & Resistance | Volume - YouTube

Hi, Manek here and today we will talk about what is technical analysis, types of charts, support and resistance and volumes

If I try to explain what is technical analysis in 3 simple words, it is nothing but the study of charts

May it be trend lines, indicators, supports, and resistance, that all come under technical analysis

Under TA we study the past and try to get an idea of the future which is the whole concept of TA

Let us see the principles of TA, the first being that price discounts everything

For ex- the Adani group which has been in the news has given phenomenal returns, even 5x, 10x

But it saw a downfall due to the recent news, and if you see the chart, the selling started 2-3 days early

The second principle is that the price moves in a trend until it bends

Trend is basically if the price is continuously going up, it is in an uptrend and as soon as it takes a turn

there is a possibility of a sideways trend or a downtrend

The third principle is that price is the reflection of the psychology of he

The psychology of the market participants is reflected on the charts

And the fourth principle is that history repeats itself and the patterns that formed earlier will form and react the same way

Why should we do technical analysis?

Let's say you did a fundamental analysis of a stock meaning you read the balance sheet and you like it

And you are now confused that should you buy it or not, as if the market falls you can face a loss

This is where TA comes and through support and resistance we get an idea that should we buy or sell

And we can take an informed decision to buy and sell at the right price

Let us now discuss the types of charts named line, bar and candlestick

The line chart is nothing but the reflection of closing prices as you can see on the screen

and if you connect the closing prices of multiple days you will get the line chart

The next is the bar chart that has 4 prices, open, high, low, and close

So after knowing these 4 values you can plot a bar chart which is a vertical line with 2 protrusions

The left protrusion is the open of the day and the right one is the closing

The highest point of the bar is the high of the day and the lowest point is the low

The next chart is the candlestick chart for which you need the same 4, open, close, high, and low

Now if you see a green candle that means the close is higher than the open

For ex- a price opened at 100 and closed at 110 which is a positive close hence in green

And the highest point can be 115 and the lowest can be 95

Hence you can see a body of the candle and is red if it is negative meaning it opened on 100 and the price went to 90

and closed at 92, hence giving us a negative candle

Now let us take a simple example to understand support and resistances

Now assume you have a tennis ball and throw it towards the floor very hard, you will see a bounce

That is because the floor is acting as a support and not letting it go down further

Similarly, if you throw it towards the ceiling, it will act as a resistance and will not let it go further up

So the floor is acting as a support and similarly, the ceiling is acting as the resistance

So in the market you can consider support from where the rice can go up and come down from resistance

Let's consider an example, that the stock price starts at 100, falls to 90 and in a few days go to 110

So here you can see that at 90 the price got support saw a demand and jumped back up

to 110 which was even more than the initial price and then let's assume it comes back to 90

So it takes resistance and 110 goes back to 90 and bounces back to 95

So we can assume that it gets supply at 110 and comes down and gets demand at 90 and goes up

One important thing, that when support breaks it acts as a resistance and when resistance breaks it acts as a support, this is the concept of polarity

Now let us understand why this happens and why support breaks with the same levels of 90 and 110

Let's assume that it has touched 90 many times and now not much buyers are left and goes to 80

Now that 90 will act as a resistance as there was no demand and supply was more hence it broke that barrier

So now whenever the price goes up, there will be supply at 90 and will act as a resistance

Similarly, we can see a breakout at 110 as demand was more and hence will act as support

because there was a higher demand and will show some strength if it goes again to that price

So now let us talk about volumes, for example you sell a share of reliance for profit and i think it will go up

So the volume of the transaction is 1

And any price needs volume to move which will come from buying and

and the big institutions that have crores will purchase can reflect a movement in the prices

And hence we can assume that it can go further up due to high volumes

So whenever you see a price increasing you will also notice an increase in volumes and if it continues you can assume it can go further

So this is what technical analysts do, assume we saw good breakouts after 110 with volumes

and has the potential to go further high, the technical analysts see this as an opportunity and buy

So today we covered technical analysis, types of charts, support and resistances and volumes

And we will cover chart patterns and indicators in the next one, smash the like button and meet you in the next video