As a trader, you will go a long way if you know your technical tools like price charts and other technical charts well. Most traders will tell you that they have their own list of tools that they swear by and follow religiously. In order to make prudent choices like identifying when you buy, hold, or sell requires market analysis. And these technical tools bring some of the most sophisticated data and information into the prevailing market condition and buyers’ sentiments. So, which tools are a must? Here’s a list exclusively for you-
1. The basic apparatus
When you first begin with trading there are some fundamental tools and charts you must gain insights into like knowing equity index, forex prices, and prevailing and previous interest rates. Follow the monthly reports like employment reports, the existing inflation rate, buying pattern, seller sentiments, etc. As a beginner, you can aim to familiarize yourself with these tools because this will lay the foundation stone in your trading journey.
2. Rule of thumb
There are certain basic rules of thumb that a good trader should abide by. These include – a) Put your emotions aside.
b) Plan your Trade and Trade According to that Plan.
c) Never try to invest more in a losing trade.
d) Cut your losses fast.
e) Always Use stop losses to protect your downside.
3. Candlestick: Your go-to tool
This is one of the most widely used tools among traders. Candlesticks are preferred because they demonstrate price movements for securities, derivatives, currencies, stock bonds, and more. Since this tool highlights various price data points like open price, close price, highest price, and even the lowest point it is a handy tool to make trading decisions. Want to know market sentiment? The Candlestick tool is for you.
4. Trend analysis
Relative Strength Index (RSI) is highly recommended by most traders to understand the recent price fluctuations. You can use this to plot price changes in both bearish and bullish markets. Ideally, you can look at the scope of this price chart for days for accurate readings. If the readings are above 70%, it means that shares are repurchased. And if the readings are below 30% it indicates that the stock is oversold.
5. Stochastics and MACD (Moving Average Convergence Divergence)
These tools are often used in a pair. Stochastics tool aims to compare the stock’s closing price with the overall price for a specific period of time as per your preference. On the other hand, MACD as the name suggests takes averages into consideration. The reason why this pair is a hit among the traders is that the perfect timing of this tool suggests when exactly the market is about to reverse.
So, these are some of the must-know tools that you can follow to gain some meaningful insights into the market. For further guidance, please contact us.
