As I am writing this blog, the US market is rallying and Dow Jones has breached 9000points for the first time in 12mths. This is a milestone considering the fact that there was so much uncertainty in the market for trading. However, now that we have a clearer direction, it would be easier for us to trade for a profit. In order to do this, you must first learn the basic of chart reading.
On your top is a daily chart of Ho Bee, a counter listed in Singapore stock exchange. This chart was generated using a program called SI station. If you look at the chart closely, you will realise that there is green and red colour bar which we called 'Candlestick'. I personally use candlestick to study the trend of the chart, however, there are more variety of chart style available depending upon your liking. As a trader, we are concern about not trading against the trend. And if you notice the price chart, it is either trending upward or downward, gradually or sharply.
The red candle in the chart basically means that the closing price of the stock is lower than the opening price of it. Whereas a green candle shows that a closing price is higher than the opening. When you see candlestick that close higher and higher compared the previous few candles, you can see that a uptrend is forming. The reverse will lead to a down trend. Candlestick can also form various patterns which can theoritically help you to forecast the future price move. I shall dedicate an entire posting on the different common candlestick pattern to explain more in detail again.
Knowing how to interpret the chart is still not enough for you to begin trading. You must combine your knowledge with technical indicators to assist you in confirming the trend. Pls note that no combination can give you 100% accuracy in predicting stock price movement. We can only increase our chance of making money by trading certain setup which gives us a higher probability in making money.
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