Why study stock charts?
Before the advent of computers and data feeds, the use of stock charts to formulate trading strategies was outside the mainstream trading technology. The reason being that creating charts was difficult. Each chart had to be created by hand, with chartists adding an additional data point at the close of trading for each security they followed. Moreover, chart users were often misrepresented as a bizarre group of individuals huddled in the recesses of the brokerage house as they added the latest data point to their coveted charts. However, with the advancement of technology and the increased popularity of technical analysis, the use of charts has greatly increased, making them one of, if not the most important tools used by technical traders. A single stock chart has the ability to display a significant amount of information. More conceptually, charts are an illustration of the battle between buyers and sellers. While this point is debatable between investment schools such as technical, fundamental and efficient market analysis, technical analysis assumes that: a) prices discount everything, b) prices move in trends and c) history repeats itself. Assuming the above principles are true, charts can be used to formulate trading signals and may even be the only tool a trader uses.
Patterns in a stock chart
Chart patterns signal to traders that the price of a security is likely to move in one direction or another when the pattern is complete. There are two types of patterns in this area of technical analysis: reversal and continuation. A reversal pattern signals that a previous trend will reverse once the pattern is completed. Conversely, a continuation pattern indicates that the previous trend will continue once the pattern is completed. The difficulty with identifying chart patterns and their subsequent signals is that chart usage is not an exact science. In fact, it is often seen as more of an art than a science. Although there is a general idea and components to each chart pattern, the price movement does not necessarily correspond to the pattern suggested by the chart. This should not deter potential chart users – once the basics of the chart are understood, the quality of the chart patterns can be improved by looking at volume and secondary indicators. There are several concepts that need to be understood before reading about specific chart patterns. The first is a trendline, which is a line drawn on a chart to signal a level of support or resistance for the price of the security. Support trend lines are those levels where prices have difficulty falling below. Conversely, a resistance trend line illustrates the level at which prices have difficulty going above. These trend lines can be constant price levels, such as $50, or rise or fall in the direction of the trend as time passes. Now that we have an understanding of the concepts behind the use of charts as a trading technique, we can begin to explore the many different patterns used by chartists.
About the Vikingen
With Vikingen’s signals, you have a good chance of finding the winners and selling in time. There are many securities. With Vikingen’s autopilots or tables, you can sort out the most interesting ETFs, stocks, options, warrants, funds, and so on. Vikingen is one of Sweden’s oldest equity research programs.
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