Learn the basics to analyze Stock Market Value
The “corporate shares” in the stock market trade at prices that fluctuate throughout each trading day. These prices might seem random for various individuals. However, traders with experience learn to interpret these stock values via techniques that elucidate the fluctuations in price. Several methods available can be useful for anyone to learn and understand the stock market values. Yet, as the prices unfold, it is difficult “Studying price action” or reading the value in real-time because this skill is developed as a result of experience.
The basic process of reading stock values:
- You can use any software for charting any stock of your choice. Generally, clients are provided with such charting software by the brokers. Various free services for charting stocks with several features are available online.
- Once you chart the stock, analyze the fluctuations in it. A steady-state of flux characterizes the stock market, and some stocks remain unaffected by this state. Therefore, many people can’t predict these fluctuations.
- A “high” refers to a point the prices begin to deteriorate after an ascent whereas a “low” occurs after prices deteriorate and further rise. It would help if you recognized the “highs” and “lows,” which emerge when the values of stock fluctuate.
- Hundred years ago, Charles Dow introduced a concept widely prevalent today as the “Dow Theory.” It states that if a “high” exceeds the “previous high” and the low resulting from each “high” exceeds the “previous low,” then it’s a trend. Make a comparison of the successive highs and lows because various trending strategies are based on these “higher highs” and “higher lows.”
- Analyze intervals of “lower lows” and “lower highs” and observe these patterns while reading stock market values as it’s a trend, and it infers that prices are declining. Therefore it is perilous to buy into such stock before the trend is reversed.
- Look for points on the charts where an up or down trend started to reverse after ending. In majority cases, this is marked by a new exceeding high in the rising trend or a new exceeding low in a declining trend. You can spot a change in the market conditions if such events take place after a trend.