{"id":15,"date":"2018-08-26T11:06:16","date_gmt":"2018-08-26T11:06:16","guid":{"rendered":"https:\/\/technicalanalysisofstocks.in\/articles\/?p=15"},"modified":"2022-11-05T15:53:48","modified_gmt":"2022-11-05T15:53:48","slug":"how-to-do-stock-trend-analysis","status":"publish","type":"post","link":"https:\/\/www.technicalanalysisofstocks.in\/articles\/how-to-do-stock-trend-analysis\/","title":{"rendered":"How To Do Stock Trend Analysis"},"content":{"rendered":"<div class=\"f5e6b27933b27206dd1e7c8ffd0cf440\" data-index=\"4\" style=\"float: none; margin:10px 0 10px 0; text-align:center;\">\n<script async src=\"https:\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js?client=ca-pub-4887266588189027\"\r\n     crossorigin=\"anonymous\"><\/script>\r\n<!-- TA Blog Below Image -->\r\n<ins class=\"adsbygoogle\"\r\n     style=\"display:block\"\r\n     data-ad-client=\"ca-pub-4887266588189027\"\r\n     data-ad-slot=\"2552137125\"\r\n     data-ad-format=\"auto\"\r\n     data-full-width-responsive=\"true\"><\/ins>\r\n<script>\r\n     (adsbygoogle = window.adsbygoogle || []).push({});\r\n<\/script>\n<\/div>\n<h1>How to do Stock Trend Analysis<\/h1>\n<p>I remember pretty well what it was like trying to get started using Stock Trend Analysis. The learning curve was excruciating at times. It seems no matter what I learned, I didn\u2019t understand quite enough to put it into practice. Over time with some serious tenacity I became proficient enough to begin making some real money in the <a href=\"https:\/\/www.technicalanalysisofstocks.in\/articles\/trading-essentials-to-become-a-good-trader-in-stock-market\/\">stock market<\/a>.<\/p>\n<p>My own major hurdle\u00a0to gaining skill was there are so many well meaning people winning to send advice and so many resources online for technical descriptions of various indicators, but nothing I found seemed to help me understand how all these indicator definitions and macroeconomic data fit together to form a solid understanding of technical trading. I think I can save you some time and tons of frustration with this handy little getting started guide.<\/p>\n<h2>An overview of Technical Analysis<\/h2>\n<p>I figure if you\u2019re interested in <a href=\"https:\/\/www.technicalanalysisofstocks.in\/articles\/is-trading-with-technical-analysis-profitable\/\">technical analysis<\/a> enough to read this far, you are already familiar with how the stock market works and how to buy and sell stocks. I hope so because it\u2019s an obvious prerequisite.\u00a0Keep in mind this is\u00a0an informal overview of the learning path many traders, myself included have taken to understand Technical Analysis.<\/p>\n<h2 class=\"mceTemp\">Technical Analysis\u00a0 &#8211;\u00a0 Fundamental Topics<\/h2>\n<div>\n<div class=\"mceTemp\">\n<p>What is Technical Analysis?<\/p>\n<p>For the unaware, there are two major kinds of <a href=\"https:\/\/www.technicalanalysisofstocks.in\/articles\/stock-analysis-skills-introduction\/\">Stock Analysis<\/a>. <a href=\"https:\/\/www.technicalanalysisofstocks.in\/articles\/combining-technical-and-fundamental-analysis\/\">Technical and Fundamental Analysis<\/a>.<\/p>\n<\/div>\n<\/div>\n<p>Although the two are not mutually exclusive, traders tend to favor one over the other. <a href=\"https:\/\/www.technicalanalysisofstocks.in\/articles\/what-is-fundamental-analysis-of-stocks\/\">Fundamental Analysis<\/a> looks at a company\u2019s assets, debt, earnings and cash flow. It gives the analyst a clear picture of a company\u2019s health. When an analysis of one company is compared to it\u2019s peers\u00a0 (group of companies in the same business) it gives clues about potential weaknesses and strengths of the company. It\u2019s also useful in evaluating a company\u2019s long term prospects for growth.<\/p>\n<p>Technical Analysis looks to take advantage of the collective knowledge of\u00a0 open market participants (other traders) who are by-and-large Fundamental Analysts. Technical Analysis is at it\u2019s heart a study of supply and demand.\u00a0So, lets explore just how Technical Analysts use the <a href=\"https:\/\/www.technicalanalysisofstocks.in\/articles\/stock-market-trading\/\">market as their guide to trading<\/a> markets.<\/p>\n<p>A Simple Technical Analysis Example: Price Speaks Volumes \u2013 a Volume Price relationship \u2013 First, know that Price and Volume are both technical indicators. Price being of course the chief\u00a0indicator over\u00a0any other. Each time a <a href=\"https:\/\/www.technicalanalysisofstocks.in\/articles\/how-pr-affects-stock-prices\/\">stock price<\/a> moves up it indicates\u00a0a vote of optimism by all participants. Sellers held out for a higher price than the prevailing rate and buyers stepped in and bought at that price anyway. Sellers holding out for more while buyers step in to pay the difference between the market and asking price is\u00a0shows market optimism.<\/p>\n<p>Volume is the number of shares traded over time. Technical traders look at price and volume together to\u00a0gague how optimistic or pessimistic buyers and sellers are and are becoming. An increase in volume across time frames indicates\u00a0increasing participation and therefore increasing conviction that prices will continue to move in the current direction.\u00a0 Whereas, when volume begins to wane it is an indicator that market participants are losing their conviction that prices will continue in their current direction.<\/p>\n<div class=\"mceTemp\">One more phenomenon to consider is that once price direction changes, volume may begin to increase, once again\u00a0confirming the conviction of market participants of the new price direction. When an indicator such as volume begins to agree with the price direction, this is known as a kind of price confirmation.<\/div>\n<h2 class=\"mceTemp\">Technical Analysis Indicators<\/h2>\n<p class=\"mceTemp\">Aside from the simple indicators of price and volume, there are myriad indicators and more are\u00a0created every day.\u00a0An indicator\u00a0can often be\u00a0something as simple as a moving average or\u00a0far more complex involving lengthy formulae.\u00a0As you\u2019ve seen already,\u00a0indicators are an important part of understanding\u00a0and predicting market action.\u00a0All technical analysis indicators fit into two distinct\u00a0categories.<\/p>\n<div class=\"mceTemp\">It\u2019s important to note that market conditions dictate which kind you will use, but never ignore price. Indicators are predictors, but price speaks volumes,\u00a0only prices\u00a0are reality.<\/div>\n<p>Accumulation\/Distribution Line \u2013 Joins price and volume to indicate how money may be flowing into or out of a security.<\/p>\n<p>Aroon \u2013 indicates whether a security is trending or oscillating.<\/p>\n<p>Average Directional Index (ADX) \u2013 indicates whether a security is trending or oscillating.<\/p>\n<p>Average True Range (ATR) \u2013 Measures a security\u2019s volatility.<\/p>\n<p>Bollinger Band Width \u2013 indicates the distance between a security\u2019s Bollinger Bands.<\/p>\n<p>Commodity Channel Index (CCI) \u2013 indicates a security\u2019s variation from its \u2018typical\u2019 price.<\/p>\n<p>Chaikin Money Flow (CMF) \u2013 Joins price and volume to indicate how money may be flowing into or out of a security. Alternative to Accumulation\/Distribution Line.<\/p>\n<p>Chaikin Oscillator \u2013 Joins price and volume to indicate how money may be flowing into or out of a security. Based on Accumulation\/Distribution Line.<\/p>\n<p>Force Index \u2013 A simple price-and-volume oscillator.<\/p>\n<p>Moving Average Convergence\/Divergence (MACD) \u2013 Difference of two EMAs that indicates a security\u2019s momentum and direction.<\/p>\n<p>Money Flow Index (MFI) \u2013 Joins a security\u2019s \u2018typical\u2019 price with its volume to indicate how money may be flowing into or out of the security.<\/p>\n<p>On Balance Volume (OBV) \u2013 Joins price and volume in a very simple way to indicate how money may be flowing into or out of a security.<\/p>\n<p>Percentage Price Oscillator (PPO) \u2013 A percentage-based version of the MACD indicator.<\/p>\n<p>Percentage Volume Oscillator (PVO) \u2013 The PPO indicator applied to volume instead of price.<\/p>\n<p>Price Relative \u2013 Technical indicator that compares the performance of two securitys to each other by dividing their price data.<\/p>\n<p>Rabbitt Q-Rank \u2013 Paul Rabbit\u2019s proprietary indicator that rates a security based on technical and fundamental factors.<\/p>\n<p>Rate of Change (ROC) and Momentum \u2013 indicates the speed at which a security\u2019s price is changing.<\/p>\n<p>Relative Strength Index (RSI) \u2013 indicates how strongly a security is moving in its current direction.<\/p>\n<p>Standard Deviation (Volatility) \u2013 A statistical measure of a security\u2019s volatility.<\/p>\n<p>Stochastic Oscillator (Fast, Slow, and Full) \u2013 indicates how a security\u2019s price is doing relative to past movements. Fast, Slow and Full Stochastics are explained.<\/p>\n<p>StochRSI \u2013 Joins Stochastics with the RSI indicator. Helps you see RSI changes more clearly.<\/p>\n<p>TRIX \u2013 A triple-smoothed moving average of price movements.<\/p>\n<p>Ultimate Oscillator \u2013 Joins long-term, mid-term and short-term moving averages into one number.<br \/>\nWilliams %R \u2013 Uses Stochastics to determine overbought and oversold levels.<\/p>\n<h3 class=\"mceTemp\">Leading indicators \u2013 Use in sideways markets<\/h3>\n<div class=\"mceTemp\">Leading indicators\u00a0react before price does. Most\u00a0leading indicators attempt to show changes in the strength or force of price movement, or momentum.\u00a0Leading indicators are useful to help traders predict price movements because they can show the\u00a0strength\u00a0or weakness of prices at their current level.\u00a0Leading indicators do not do well as buy\/sell indicators in steadily trending markets (up or down) because they signal changes in momentum. They do well in sideways markets and give traders\u00a0accurate signals about when to buy or sell.<\/div>\n<div class=\"mceTemp\"><\/div>\n<div class=\"mceTemp\">Some useful leading indicators include Momentum, Stochastic and the Relative Strength Indicator (RSI).<\/div>\n<h3 class=\"mceTemp\">Lagging Indicators\u00a0\/ Trend Following Indicators \u2013 Use in trending markets (moving up \/ moving down)<\/h3>\n<div class=\"mceTemp\">Lagging indicators follow price movements. A moving average is a simple kind of lagging indicator. Lagging indicators are often used when the markets are in a very strong trend. They quickly show traders the average direction of a stock price. They\u00a0can\u00a0send false signals in <a href=\"https:\/\/www.technicalanalysisofstocks.in\/articles\/tips-for-stock-market-trading\/\">markets that are trading<\/a> at parity \/ moving sideways. Their best use is in trending markets because they can clearly show traders when to get in and how long to stay in.<\/div>\n<div class=\"mceTemp\"><\/div>\n<div class=\"mceTemp\">\u00a0The most common Lagging Indicators include Moving Average, Exponential Moving Average and Moving Average Convergence Divergence (MACD)<\/div>\n<h2>Technical Analysis Understanding Timeframes<\/h2>\n<p>In Technical Analysis \u2013 Indicators are meaningless without understanding them in the context of time. Indicators \u2013 leading and lagging all use<strong><em> time and price <\/em><\/strong>as the very basis of any\u00a0formula.\u00a0It may help to think of\u00a0time frames as magnification. If you look at a\u00a0one year\u00a0weekly chart and zoom into a one year daily chart, you are immediately \u00a0aware that you can see price action in greater detail. Likewise moving from a one year daily chart to a three month daily chart affords even greater detail of the price action.<\/p>\n<h3>More about time frames in technical analysis<\/h3>\n<p>What kind of trader are you? Do you buy into a <a href=\"https:\/\/www.technicalanalysisofstocks.in\/articles\/what-countries-trade-stocks-the-most\/\">trade and then watch impatiently at every tick in the stock<\/a> price? Or are you more of a \u201c<strong>set it and forget it<\/strong>\u201d kind of trader who checks in on the price every few days or weeks? Maybe your style is somewhere between? Why is this important and what does it have to do with timeframes? read on\u2026<\/p>\n<h4>The\u00a0Day Trader<\/h4>\n<p><a href=\"https:\/\/www.technicalanalysisofstocks.in\/articles\/beginning-online-stock-trading-better-know-what-a-day-trader-is\/\">Day Traders quickly buy and sell stocks<\/a> multiple times a day to try to lock in quick profits. The Day Trader\u00a0analyzes <a href=\"https:\/\/www.technicalanalysisofstocks.in\/articles\/reading-bars-and-chart-indicators\/\">chart patterns and indicators<\/a> which may span only a few hours or even a few minutes. Day trading is a risky business where great sums\u00a0are gained or lost in mere seconds.<\/p>\n<h4>The\u00a0Active Trader<\/h4>\n<p>Although there is no official definition as with the Day Trader, the\u00a0Active Trader looks for trends that span from a few months to as little as a few days. A typical trade for an Active Trader\u00a0trader can be very short, perhaps a day or may last for many months as long as the current trend is intact.<\/p>\n<h4>The Swing Trader<\/h4>\n<p>Although the strategy used by the swing trader is very similar to that of the Active Trader, the main difference as shown in the chart below is that the swing <a href=\"https:\/\/www.technicalanalysisofstocks.in\/articles\/mistakes-99-stock-trader-makes-in-the-market\/\">trader looks to maximize profits by taking advantage of the normal downturns in an overall upwardly trending stock<\/a>. The Swing Trader cycles in and out of the trade repeatedly until the overall trend weakens before making a final exit. Swing traders must watch the price action more often than the active trader since the swing trade requires\u00a0frequent attention.<\/p>\n\n<div style=\"font-size: 0px; height: 0px; line-height: 0px; margin: 0; padding: 0; clear: both;\"><\/div>","protected":false},"excerpt":{"rendered":"<p>How to do Stock Trend Analysis I remember pretty well what it was like trying to get started using Stock Trend Analysis. The learning curve was excruciating at times. It seems no matter what I learned, I didn\u2019t understand quite enough to put it into practice. Over time with some serious tenacity I became proficient enough to begin making some real money in the stock market. My own major hurdle\u00a0to gaining skill was there are so many well meaning people winning to send advice and so many resources online for technical descriptions of various indicators, but nothing I found seemed <\/p>\n","protected":false},"author":1,"featured_media":17,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_seopress_robots_primary_cat":"none","_seopress_titles_title":"","_seopress_titles_desc":"","_seopress_robots_index":"","footnotes":""},"categories":[6,5,2],"tags":[7],"class_list":["post-15","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-fundamental-analysis","category-stock-trend-analysis","category-technical-analysis","tag-stock-trend-analysis","has_thumb"],"_links":{"self":[{"href":"https:\/\/www.technicalanalysisofstocks.in\/articles\/wp-json\/wp\/v2\/posts\/15","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.technicalanalysisofstocks.in\/articles\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.technicalanalysisofstocks.in\/articles\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.technicalanalysisofstocks.in\/articles\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.technicalanalysisofstocks.in\/articles\/wp-json\/wp\/v2\/comments?post=15"}],"version-history":[{"count":4,"href":"https:\/\/www.technicalanalysisofstocks.in\/articles\/wp-json\/wp\/v2\/posts\/15\/revisions"}],"predecessor-version":[{"id":714,"href":"https:\/\/www.technicalanalysisofstocks.in\/articles\/wp-json\/wp\/v2\/posts\/15\/revisions\/714"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.technicalanalysisofstocks.in\/articles\/wp-json\/wp\/v2\/media\/17"}],"wp:attachment":[{"href":"https:\/\/www.technicalanalysisofstocks.in\/articles\/wp-json\/wp\/v2\/media?parent=15"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.technicalanalysisofstocks.in\/articles\/wp-json\/wp\/v2\/categories?post=15"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.technicalanalysisofstocks.in\/articles\/wp-json\/wp\/v2\/tags?post=15"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}