What are technical indicators? Technical indicators are the little friends that help you decide when to get in and when to get out of a trade. Actually sometimes they can be good friends to you and at other times they can be bad friends to you. Just like in real life, you go to your friends for advice, the advice your real friends give you or lead you to believe are not always the best choices you should make. This is the same with technical indicators.
Actually technical analysis, the formal words to describe the close inspection stock charts, can help you in trying to determine where your invested stocks are headed. You can look at these stock charts in the same way you view a weather report. You read a weather report in the newspaper or watch a news anchor on television give the details of an extended forecast in order to prepare yourself for the future weather conditions but that does not mean what they have just stated in set in stone. The same also goes with technical indicators.
The majority of people out there when asked what a stock technical indicator looks like will not be able to describe one in detail but if they *see* one they will probably say "Oh this is about the stock market." So if you ever have seen any charts with lots of lines and numbers on it then you probably have a good idea of what I am talking about. Also if you are good at math (unlike myself) the concept of technical indicators should be easy for you to understand since these indicators are basically just mathematical equations. Luckily you do not need to be a math whiz to put them to work.
Before I get more into technical indicators, I should first go over the type of information that will be available in most stock charts. Technical indicators calculate certain information and present it in a chart. In order to easily understand this information, it may be best for you to first have some ideas about what a standard stock chart will contain.
You may be able to locate these charts almost anywhere on the Internet and there are even software packages that provide the information either for free or for a small nominal fee. Either way, you'll probably be presented with a chart that has the following information: 1) an information section 2) a time section 3) a volume section 4) x and y axis [depending on the chart or rather which technical indicator helped create the chart, the x and y axis information will vary]
The information section of the stock chart does what its name implies, it provides information about the stock su
ch as what exchange it is traded through and possibly the full company name. You may find additional information such as the trading acronym or symbol, the date the chart was created, etc. For example, in the screen shot of a Taiwanese stock I'm tracking you can see that only the symbol (short name) of the stock is given on this screen. Simply clicking around in the software allows access to additional information regarding this stock.
Let's have a closer look at that screen shot. The numbers at the bottom of the screen shot in red, green, and blue provide a lot of basic information that you should familiarize yourself with. The "Open" price of 57.90 indicates the price of the stock when it opened on the market for the day in which the screen shot was taken. The "High" of 58.00 refers to the highest price that the stock has been sold for during that day up until the point when the screen shot was taken. The "Low" 56.60 refers to the lowest price that the stock has been sold for during that day up until the point when the screen shot was taken. "Vol" is in reference to Volume and the number 53442 indicates how many shares of the stock have been sold thus far for today. "Chg" refers to Change" and "Chg%" refers to "Percentage of Change." These represent the change in price from yesterday's closing price for a stock based on the "Last" reported price. The "Bid" and "Ask" numbers are representative of the price a stock can be bought or sold for. The Bid price is in reference to the amount that you can sell your stock for and the Ask price is what the stock can be bought for. There is a difference in these prices because there is a broker working as the middle man to help you with this transaction. To provide another analogy for you to better understand the difference between Bid and Ask price, you can think of a used car dealer. You may drive an old used car to a used car dealer who will give you $650US for the car (Bid price) but then the next day sell the same car to someone else for $850US (Ask price).
The X & Y axes of this chart are comprised of the amount the stock was sold for and also the time in which it sold for that price. Connecting the points together generates the line chart. The time section of the chart indicates the time period that the chart ranges (here it ranges from 9am till 1pm). Depending on how a chart is constructed, this could be over a few minutes to several hours of the day...to even several days. In my chart the time is by hour from 9am till 1pm. We can see that from 9am till 1pm the stock price has fallen between 57.XX and 56.XX.
The volume section of this chart indicates the volume of stock that was traded for that particular day. In the screen shot you can see the lower chart in light blue is a graphical representation of this data. We can see several small peaks of when larger volumes of stock were traded. Remember from my previous post that volume does not just indicate stock that has been sold but it's a combination of both bought and sold shares of a stock.
Now that you understand what kinds of basic information can be viewed in a stock chart, in my next post I'd like to discuss some practical usage of stock charts such as the one included in this post.
Actually technical analysis, the formal words to describe the close inspection stock charts, can help you in trying to determine where your invested stocks are headed. You can look at these stock charts in the same way you view a weather report. You read a weather report in the newspaper or watch a news anchor on television give the details of an extended forecast in order to prepare yourself for the future weather conditions but that does not mean what they have just stated in set in stone. The same also goes with technical indicators.
The majority of people out there when asked what a stock technical indicator looks like will not be able to describe one in detail but if they *see* one they will probably say "Oh this is about the stock market." So if you ever have seen any charts with lots of lines and numbers on it then you probably have a good idea of what I am talking about. Also if you are good at math (unlike myself) the concept of technical indicators should be easy for you to understand since these indicators are basically just mathematical equations. Luckily you do not need to be a math whiz to put them to work.
Before I get more into technical indicators, I should first go over the type of information that will be available in most stock charts. Technical indicators calculate certain information and present it in a chart. In order to easily understand this information, it may be best for you to first have some ideas about what a standard stock chart will contain.
You may be able to locate these charts almost anywhere on the Internet and there are even software packages that provide the information either for free or for a small nominal fee. Either way, you'll probably be presented with a chart that has the following information: 1) an information section 2) a time section 3) a volume section 4) x and y axis [depending on the chart or rather which technical indicator helped create the chart, the x and y axis information will vary]
The information section of the stock chart does what its name implies, it provides information about the stock su
ch as what exchange it is traded through and possibly the full company name. You may find additional information such as the trading acronym or symbol, the date the chart was created, etc. For example, in the screen shot of a Taiwanese stock I'm tracking you can see that only the symbol (short name) of the stock is given on this screen. Simply clicking around in the software allows access to additional information regarding this stock. Let's have a closer look at that screen shot. The numbers at the bottom of the screen shot in red, green, and blue provide a lot of basic information that you should familiarize yourself with. The "Open" price of 57.90 indicates the price of the stock when it opened on the market for the day in which the screen shot was taken. The "High" of 58.00 refers to the highest price that the stock has been sold for during that day up until the point when the screen shot was taken. The "Low" 56.60 refers to the lowest price that the stock has been sold for during that day up until the point when the screen shot was taken. "Vol" is in reference to Volume and the number 53442 indicates how many shares of the stock have been sold thus far for today. "Chg" refers to Change" and "Chg%" refers to "Percentage of Change." These represent the change in price from yesterday's closing price for a stock based on the "Last" reported price. The "Bid" and "Ask" numbers are representative of the price a stock can be bought or sold for. The Bid price is in reference to the amount that you can sell your stock for and the Ask price is what the stock can be bought for. There is a difference in these prices because there is a broker working as the middle man to help you with this transaction. To provide another analogy for you to better understand the difference between Bid and Ask price, you can think of a used car dealer. You may drive an old used car to a used car dealer who will give you $650US for the car (Bid price) but then the next day sell the same car to someone else for $850US (Ask price).
The X & Y axes of this chart are comprised of the amount the stock was sold for and also the time in which it sold for that price. Connecting the points together generates the line chart. The time section of the chart indicates the time period that the chart ranges (here it ranges from 9am till 1pm). Depending on how a chart is constructed, this could be over a few minutes to several hours of the day...to even several days. In my chart the time is by hour from 9am till 1pm. We can see that from 9am till 1pm the stock price has fallen between 57.XX and 56.XX.
The volume section of this chart indicates the volume of stock that was traded for that particular day. In the screen shot you can see the lower chart in light blue is a graphical representation of this data. We can see several small peaks of when larger volumes of stock were traded. Remember from my previous post that volume does not just indicate stock that has been sold but it's a combination of both bought and sold shares of a stock.
Now that you understand what kinds of basic information can be viewed in a stock chart, in my next post I'd like to discuss some practical usage of stock charts such as the one included in this post.
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