Print Trading Group Trading 101 LEARN THE BASICS SUPPORT - The price level at which there is enough demand to stop the price from dropping further is known as support. The rationale behind this is that buyers have a stronger tendency to buy and sellers have a weaker tendency to sell as the price declines towards support, becoming cheaper. The implication of the price reaching support level is that the supply will be overcome by demand and this would impede the price from going below support.

RESISTANCE - The price level at which there is enough selling to stop the price from increasing further is known as resistance. The rationale behind this is that sellers have a stronger tendency to sell and buyers have a weaker tendency to buy as the price rises towards resistance, becoming more expensive. The implication of the price reaching resistance level is that the demand will be overcome by supply and this would impede the price from rising above resistance. TREND LINE - A line drawn above pivot highs or below pivot lows showing the current direction of a price is referred to as a trend line. Trend lines can be used as a tool to visually represent resistance and support in a particular time span. These indicate the speed at which a price is changing and the direction it is moving in. Along with this, they provide descriptions of patterns during intervals of price contraction. Applying a single trend line to a chart depicts the trend clearly. Applying trend lines to the pivot highs and the pivot lows creates a channel. Trend lines are helpful to as they are useful in the determination of the current direction in market prices. For technical analysis, the trend is of immense importance, and the first step towards making a beneficial trade is to identify this trend. S&P 500 - It can be useful to have a tool that allows the tracking of the of 500 large-cap US companies. The S&P 500 is a market index that does exactly this. It indicates the performance of the stock market by outlining the risks and returns of the largest businesses. It is used by as the benchmark of the overall market, and all other investments are contrasted to it.

NASDAQ - Nasdaq is the name of a worldwide electronic marketplace where securities are bought and sold. It began operating on February 8, 1971, and it was developed by the National Association of Securities Dealers. It was created to provide investors with a fast, transparent, and computerized system for trading securities. The word “Nasdaq” also refers to the Nasdaq Composite, which is an index of more than three thousand stocks listed on the Nasdaq exchange, including global tech giants such as Google, Oracle, Apple, Amazon, Microsoft, and Intel.

Dow Jones - The DJIA ( Industrial Average, also called the Dow 30) is a stock market index that keeps a track of 30 sizeable, publicly-owned blue-chip companies that are traded on the NASDAQ and the NYSE ( Stock Exchange). It derives its name from its creator, Charles Dow. It was created by him alongside his partner in business, Edward Jones, in 1896. In common parlance, whenever reporters use the phrase “The market is up today,” it is generally the Dow that is being referred to. It is one of the oldest market indices in the US, second only to the Dow Jones Transportation Average. By design, the DJIA serves as a proxy surrogate for the broader US economy’s health. Fractional Shares - A fragment of one share of stock is called a fractional share. Fractional shares are the consequences of a company’s financial choices or actions. For instance, if an possesses an odd number of stocks, stock splits might lead to fractional shares. In cases of mergers of companies, stocks are usually combined using a ratio that is agreed on by all parties. This might result in fractional shares. Reinvestment of dividends through a dividend reinvestment plan may give you fractions of a share. Generally, it is not possible to trade fractional shares on the market. However, a brokerage firm is able to group several fractional shares to result in a full share, sell you a portion to complete your share, or break up IPO - The process of a private company beginning to sell stock to external full shares to sell their fractions to fresh investors. Always be cautious investors, thus transforming into a public company, is referred to as an about trading fees and remember that each investment has a certain risk Initial Public Offering (IPO). After an IPO, the company can sell shares to associated with it. procure the capital it requires, however it is required to be in compliance with the SEC’s (Securities and Exchange Commission) stringent guidelines for reporting. IPOs are useful as they give companies the opportunity to raise capital by selling shares via the primary market. They can also be viewed as exit strategies for early investors and founders of the company ETF - Exchange Traded Funds (ETFs) are a kind of security that are by letting them earn the full profit of their private investment. comprised of a collection of securities – for instance, stocks – that usually track underlying indices, although they are able to invest in a variety of industry sectors or use different strategies. ETFs can be compared to mutual funds, but the difference is that they have listings on exchanges, and shares of ETFs can be purchased and sold the same way ordinary stock is. A popular example of an ETF is the SPDR S&P 500 ETF (SPY) that keeps a track of the S&P 500 Index. Various types of investments can be contained in ETFs, including commodities, bonds, stocks, or a combination of different types. An ETF is a marketable security. This means that it is associated with a price that enables it to be conveniently traded. EMA - An exponential refers to a calculation of average price over a particular span of time. An EMA places more emphasis on the price data that is the most recent. As a consequence, it reacts much quicker to changes in price. Despite being a very old indicator of trade, it is still in widespread use by a number of traders today. Day traders integrate EMAs into charts in order to assist with the determination of trend, direction, and strength. Moving averages are basically measures of the mean prices of securities that are derived by calculating the average of the prices over a specific span of time. They are often used by traders when gauging market trends so as to increase their likelihood of success and trade in the direction the market is going in. Difference between EMA and SMA - There are similarities between the exponential moving average and simple moving average, mainly that both of them are based on the same principles and both are used to gauge trends and smooth price fluctuations. Nevertheless, there exist some important distinctions between them.

✦ A major distinction between EMA and SMA is that SMA is the calculation of the SMA - A simple moving average is the computation of the mean price mean price data of the whole timespan whereas EMA is a weighted calculation of a stock over a specific period of time. It is simply the sum of past that places greater emphasis on recent data of a period of trading. As a result, EMA is able to move quicker and change direction before the SMA can. closing prices over a particular time span divided by the number of price or data points. Thus, it results in the stock’s mean price over ✦ SMAs indicate a true average of the prices over an entire period of time. Thus, SMAs might be more useful in the identification of levels of support or that time span. resistance as opposed to EMAs which have quicker reactions to changes in price that are recent.

✦ SMAs let you remain in trades longer in cases of inconsistent behavior or temporary movements in price, whereas EMAs begin to turn down as soon as price retraces lower during a rally and they indicate a direction change prematurely.

✦ SMAs also generally have greater lag as compared to EMAs. RSI ( Index) - The VWAP - The Weighted Average Price indicates the (RSI) was created by J. Welles Wilder. It is a average closing prices over a given period of time. oscillator that calculates the speed and change of price Simultaneously, it emphasizes the periods of greater movements. It ranges from 0 to 100. Generally, when the volume. Thus, the VWAP is a lagging indicator, as it hinges RSI is over 70, it is regarded as overbought, and when it is on previous data. If the price rises above the VWAP lower than 30, it is considered oversold. By searching for indicator, it signals that the bullish move has great instances of divergence and failure swings, we can generate strength. The strength is so high that the price has broken signals. Another use of the RSI is the identification of the from its average value on the chart. Thus, it gives us a long general trend. signal. It is similar in cases of bearish breakouts, although those are in the opposite direction. MACD - The Moving Average Convergence/Divergence Indicator is a momentum oscillator with the main purpose of tracking trends in trade. Even though it’s an oscillator, it is not generally used to determine if an asset is overbought or oversold. It is displayed on the chart as two lines that oscillate with no fixed boundaries. The crossover of the two lines indicates trading signals comparable to a two moving average system.

✦ When MACD crosses above zero, it is regarded as bullish, whereas if it crosses below zero, it is bearish. Additionally, MACD turning up from below zero is regarded as bullish and turning down from above zero is regarded as bearish.

✦ In a situation where the line of MACD crosses from below to above the signal line, the indicator is regarded as bullish. The further under the zero line, the more powerful the signal.

✦ In a situation where the line of MACD crosses from above to below the signal line, the indicator is regarded as bearish. The further over the zero line, the more powerful the signal. Options Trading - Contracts the entitle the bearer the right (but does not obligate them) to trade a quantity (usually 100 shares) of some underlying asset (an index or stock) at a pre-determined price either upon or before the expiration of the contract. As is the case with a majority of other classes of assets, options can be bought using brokerage investment accounts. Just as with a bond or stock, options are securities and they represent binding contracts with properties and terms that are firmly defined

• Calls - A call option is the right to purchase a hundred shares of a specified stock from the option’s seller at a preset price, referred to as the “strike price”. This right must be exercised by a fixed date and time, otherwise, it lapses. When a call option is purchased, the seller is paid a fee called a “premium”. Holders of call options are hopeful that the associated stock’s market price will rise in the time to come. This is because if the stock price rises beyond the strike price, the option holder can exercise the call and purchase that stock from the seller of the call at the strike price, which is now less than the stock’s current market value. Then, they have the choice of keeping the shares (that they purchased at a bargain price) or sell them further to earn a profit. In case the stock price falls rather than increasing, the holder can let the call option reach expiration, thus limiting their losses to the premium they paid to buy the option.

• Puts - A put option refers to the right to compel the seller of the put option to buy from you 100 shares of a specific stock at the strike price. Holders of put options hope that the price of the stock will decrease and be lower than the strike price. If such a situation arises, the seller of the option will be forced to purchase from you shares at the strike price, that will now be greater than the prevailing market price. As a put option allows you to compel the seller to buy your shares at a price greater than market value, it acts as insurance against the loss of value of your shares. In case the market value of the shares rises instead of falling, the value of your shares will have increased and you can allow the put option to expire as your loss will be limited to the premium you paid to buy the put.

• Divergence - When the price of an asset is moving in a direction different from its indicator, the situation is called a divergence. Generally speaking, if the price is increasing and reaching higher highs but the indicator is reaching lower lows, a divergence has occurred. The occurrence of a divergence indicates that the prevailing price trend is displaying indicators of weakening and the price may be caused to alter direction. This can take place between an asset’s price and most indicators. Price divergences may be either positive or negative. Positive divergences indicate that an asset’s price may rise whereas negative divergences indicate that the price will probably drop. Yet, one must take care not to rely solely on divergences while executing trades as it might not provide timely trade indicators. They can continue for a long stretch of time without a price reversal occurring. Types of Divergences:

✦ Bearish divergence: When the price of an asset is reaching higher highs whereas your indicator of choice is signaling lower highs, it is called a bearish divergence. Usually, this gives rise to the price undergoing a quick bearish move.

✦ Bullish divergence: Bullish divergences are polar opposites of bearish divergences. These occur when an asset’s price is reaching lower lows whereas the indicator is signaling higher lows, implying that the price should trend upwards.

✦ Hidden bearish divergence: In situations where the price of an asset is reaching lower highs but the indicator displays higher highs, there exists a hidden bearish divergence. This suggests that the price should continue trending downwards.

✦ Hidden bullish divergence: In situations where the price of an asset is reaching higher lows but the indicator displays lower lows, there exists a hidden bullish divergence. This suggests that the price should remain on an upwards trend. Stochastic oscillators - It is a momentum indicators that compare a security’s specific closing price to a span of its prices across a particular time span. The oscillator’s sensitivity to market movements can be reduced by adjusting the period of time or by converting the result into a moving average. A popular use of the oscillator is as a for the creation of signals of overbuying and overselling using a bounded range of 0-100 for values. Due to the bounded range, it Japanese Candlestick - Japanese particular span of time. The lower Candlesticks are a tool for shadow is the price interval technical analysis used by traders between the body’s bottom and to create charts and analyses of the low for that span of time. the price movement for securities. Candlesticks display 4 price points A security’s closing price (open, close, high, and low) across determines if the candlestick is the time span that the trader bearish or bullish. If the security Types of Candlestick patterns: specifies, making them very useful closes at a price greater than the • during trading. Candlestick opening, the real body is generally : This candlestick is created when the prices at opening and closing times are the same or in close proximity. The shadows may be of varying lengths. charting as a concept was white. In these situations, the • Gravestone Doji: The Gravestone Doji pattern, as the name suggests, looks like a developed by a rice trader from body’s top indicates the closing gravestone. It emerges when the opening and closing prices are at the low of the time Japan by the name of Munehisa price and the bottom indicates span. It is bearish in nature and it signals a downtrend in the price following a trend reversal. Honma. While in the process of the opening price. regular trade, Homma found that • Dragonfly Doji: The Dragonfly Doji pattern emerges when a security’s opening and closing prices are at the high of the time span. It consists of a lengthy shadow and it indicates along with the forces of demand In case the closing price is lower that an uptrend is going to reverse. When this pattern appears following a decline in price, and supply, the traders’ emotions than the opening price for the it signals that the price may increase. If the following candle rises, this confirms the impending price hike. It indicates that buyers now outnumber sellers in the market. had a considerable influence on period, the body is filled up or the rice market and its prices. • Bearish Engulfing Pattern: The Bearish Engulfing Pattern signals bearish trends in the black. The bottom of the body market. It is comprised of a sizeable candlestick. The previous candlestick gets engulfed indicates the closing price and the by it. It is a “down” candlestick, wherein the price at closing time is lower than that at All candlesticks comprise of a top indicates the opening price. In opening time. It indicates a bearish reversal in trend. central portion that displays the modern times, the white and black • Bullish Engulfing Pattern: Bullish Engulfing Pattern emerges towards the conclusion of a interval between a security’s downtrend. It consists of a compact down candlestick that is enveloped by a bigger up colors of the candlestick bodies candlestick. It signals that the buying pressure is experiencing a surge. Quite often, this opening and closing price. This have been replaced with more triggers a trend reversal as there is an entry of more buyers into the market that further area is called the body. Each colors, for example, red, blue, and drives up prices. candlestick also has two shadows. green. Traders have a choice of • Hammer: The Hammer pattern consists of a lengthy tail on its lower end and an upper shadow that is almost negligible. It generally indicated market reversal, either bearish or The upper shadow is the price colors when they use electronic bullish. interval between the top of the trading platforms. body and the high for the For more info please visit:

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