How to perform technical analysis while buying shares

New investors may find it rather tricky to invest in the share market. So, how do they go about the process? Before you invest in a stock, it’s essential to know what would be the right price to enter or leave it. This can only be achieved through proper analysis of stocks.

There are two ways to analyse stocks: fundamental analysis and technical analysis.

Fundamental analysis considers earnings, interest rates, company management, competitors, and other factors. It calculates a stock’s current fair value and forecasts the future value.

Technical analysis, however, assumes that all the above fundamentals are already priced into the stock. So, it takes the current value of the stock to be a fair value.

Read on to know more about technical analysis of stocks.

What is technical analysis?

Technical analysis studies the behaviour of the share market and participants. It evaluates investments to help identify trading opportunities by analysing statistical trends gathered from price movements and volume. It’s the right choice if you want to invest in the share market in the short term.

What does technical analysis do?

It’s important for the investor to analyse how to achieve their investing goals. Platforms like Kotak Securities provide hands-on analysis and research reports. You can start simply by opening a trading or demat account. Technical analysis helps analyse the price, volume, trends, support, and resistance of the market or shares.

Support is that level of price below which an asset does not go for a specific period. Right from this point, the demand for the stock increases again. Resistance is a stock’s highest point which is reached before traders start selling and the stock price falls again.

These indicators help you get clear entry & exit signals as well as quick price forecasting. They also help you find new trends in the share market.

Technical analysis: Using different types of charts as trade indicators

Line charts: They are the most basic charts used in technical analysis. Here the closing prices of stocks or indices are plotted and joined by a connecting line. The Y-axis represents the stock price, while the X-axis denotes the timeframe. They can be checked by plotting closing prices of stocks on an hourly, daily, weekly, or monthly basis.

Bar charts – Bar chart represents all four key prices by day: open, close, high, and low.

Candlestick charts: Candlestick charts also represent open, close, high, and low of the day. Candlesticks are easy to understand because of the colour patterns depicting the opening and closing differences. Such patterns also predict the future price of a stock or index.

Point & figure charts: Point and figure charts consist of X’s and O’s that represent price movements in opposite directions. X’s mean a rise in stock prices, while O’s mean fall in the prices. These charts do not represent time. Each X or O on a graph means one unit price rise or fall respectively. The number of times X’s and O’s are plotted represents the number of times units have increased or decreased.


Technical analysis can make money for you in the short term. But you must gain knowledge to apply these techniques and get the desired result. One can also choose a combination of both fundamental and technical analysis to make sound investments in the share market.

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