When trading stocks, you will analyse data to decide when to buy or sell. Traders use technical analysis tools to help predict future stock prices by looking at past price patterns and market trends. When it comes to technical analysis, there are many tools that stock traders in Singapore employ to try and predict future price movements. Some popular technical analysis tools include trend lines, support and resistance levels, moving averages, candlestick charting, and Fibonacci retracement levels.
Trend lines
A trend line joins two or more price points with a straight line on a chart. It is used to show the overall direction of the market. Uptrends are markets where prices consistently make higher highs and higher lows. Downtrends are markets where prices consistently make lower highs and lower lows.
Support and Resistance Levels
Support and resistance levels are key price levels that traders closely watch because they act as reversal points in the market. The market tends to find buyers and move higher at a support level. A resistance level is where the market tends to find sellers and start moving lower.
Moving Averages
A moving average conveys the average price of a security over a certain period. Traders use moving averages to identify trends and trend reversals. There are different moving averages, but the most common ones used by traders are the simple moving average (SMA) and the exponential moving average (EMA).
Candlestick Charting
Candlestick charting is a favoured tool used by traders to analyse price data. Candlestick charts show a security’s open, high, low, and close prices over a certain period. They also provide information on whether prices are rising or falling.
Fibonacci Retracement Levels
Fibonacci retracement levels are technical analysis tools traders use to identify support and resistance levels. Fibonacci retracement levels are based on the Fibonacci sequence, a series of numbers where each number is the sum of the two previous numbers.
Relative Strength Index (RSI)
The relative strength index (RSI) evaluates the speed and change of price movements. The RSI is used to identify overbought and oversold conditions in the market. It is also used to spot divergences and discrepancies between the price action and the RSI.
Bollinger Bands
Bollinger bands are technical analysis tools that are used to measure market volatility. Bollinger bands are created by plotting two standard deviations above and below a moving average. They help traders identify when the market is overbought or oversold and can also be used to spot divergences.
MACD
The moving average convergence divergence (MACD) is a technical indicator that shows the relationship between two moving averages. The MACD is calculated by subtracting the 26-period exponential moving average (EMA) from the 12-period EMA. The MACD line is plotted on a separate graph below the price chart and is used to identify trend reversals.
Pivot Points
Pivot points are technical analysis tools traders use to identify potential support and resistance levels. Pivot points are calculated using a security’s high, low, and close prices. There are different types of pivot points, but the most common ones used by traders are the standard pivot point (SPP) and the Fibonacci pivot point (FPP).
Ichimoku Cloud
The Ichimoku cloud is a technical indicator that shows the average price of a security over a certain period. The Ichimoku cloud is created by plotting two standard deviations above and below an average price. Traders can use the cloud to identify trends and trend reversals and to spot divergences.
Stochastic Oscillator
The stochastic oscillator is a technical indicator that measures the speed and change of price movements. You can calculate the stochastic oscillator by subtracting the 14-period low from the 14-period high. The stochastic oscillator is plotted on a separate graph below the price chart and is used to identify overbought and oversold conditions in the market.
Average True Range
The average true range (ATR) is a technical indicator that measures the volatility of a security. The ATR is calculated by taking the sum of the 14-period high and the 14-period low and dividing it by two. The ATR is plotted on a separate graph below the price chart and is used to identify trends and trend reversals.
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