The following parameters are used for analyzing charts:-
Price - The market price is the current price at which an asset/share/commodity can be bought or sold. It is the highest amount a buyer is willing to pay for a particular stock.
Volume – Volume is one of the most basic and most beneficial parameter to understand while reading a stock/index chart. Volume is the total number of shares traded in a particular stock throughout a specific time. A drastic change in traded volumes can indicate a rise or a fall in prices.
Trend – After volume, trend is the second most essential tool for a trader. A combination of trend and volumes aids the trader to decide on whether to enter or exit a particular trade. Trend is basically classified in three types, uptrend, downtrend and sideways trend or consolidation.
- In an uptrend, price moves higher. In this case every high is higher than its previous high.
- In a downtrend, price moves lower. In this case every low is lower than its previous low.
- In consolation, prices move in a specific trading range.
Trendline – The oldest and easiest way of determining the trend is with a "trend line." All that is required is two support points to draw an uptrend or two resistance points to draw a downtrend.
Support and Resistance –
- Support level is the price around which previously, a particular security/commodity finds incremental demand. Traders use this level to enter the stock.
- Resistance level is a price around which a stock finds incremental sellers. Traders use these levels to exit a long position or even short sell a security.