Hot Deal

Candlestick chart and moving average

1592°
Tech Guru
bikidas2060

Screenshot2024-01-19163800

Image Source

Basically Candlestick charts give a 5D representation of data. There are 5 independent variables here 

  • Open The opening price
  • Close The closing price
  • High  The highest price reached 
  • Low   The lowest price reached
  • Time frame The time duration of each candle e.g. 5min, 1day, 1 week

Please take those Bullish(Green, Opening Price < Closing Price) and Bearish(Red, Closing Price < Opening Price) words by their face value as individual candles can't suggest whether there's a bullish or bearish thing going on. 

Example:

Screenshot2024-01-19165601

Chart Source: Zerodha Kite, Scrip name Polycab, 1 Day chart.

This is how candlesticks look like in real life. Here every candlestick = capture of data points e.g. open, high, low and close in 1 day. 1st one is a red candle. The opening was at 4420.7, low was at 3801, close was at 3878.45 and high was at 4420.7. Check opening and high are the same here. Check the second candlestick. It is a green candlestick. The closing price > the opening price. 

Screenshot2024-01-19171059

Chart Source: Zerodha Kite, Scrip name Polycab, 1 Day chart.

Don't try to infer anything. But this is what a real world chart looks like.

Screenshot2024-01-19171559

Chart Source: Zerodha Kite, Scrip name Polycab, 1 Week chart.

In the above chart every candlestick represents (Open High Low Close) data points over 1 Week. 

Just google about green n red candle, you will get better explanations. 

Moving Averages:

What do we mean by the term average? = (Sum of values)/(Number of values)

  • 12, 13, 13.5, 12.9, 12.8, 14, 14.1, 14.4, 14.7, 14.75, 14.9, 15  (12+13+13.5)/3 = 12.833
  • 12, 13, 13.5, 12.9, 12.8, 14, 14.1, 14.4, 14.7, 14.75, 14.9, 15  (13+13.5+12.9)/3 = 13.13
  • 12, 13, 13.5, 12.9, 12.8, 14, 14.1, 14.4, 14.7, 14.75, 14.9, 15  this is your task 13.06 (How?)
  • and so on

3 rows of individual numbers and average of three consecutive underlined numbers are shown above. Check the second row, the place, under which the underline has been started, has been shifted 1 place to the right. Same thing has happened in the third row. Right? This is how a moving average (Simple) works. It takes account of closing prices (default setting, which can be changed) and the software plots its locus on the chart itself as you can see the red (50 EMA) and yellow (200 EMA) lines.

image

Significance of moving average

Though moving average derives its value from the price itself, the price tries to track the moving average. That's a theory and it mostly works but there are anomalies. 

Screenshot2024-01-19190929

Source: Zerodha Kite, Nifty, 1 Day 

Death Cross: When lower time frame moving average (here 50) crosses higher time frame moving average (here 200) and goes below it then the condition is called Death Cross. (Red Circle)

Golden Cross: When 50 EMA crosses up 200 EMA then the condition is called Golden Cross. (Yellow Circle)

There are already premade screeners in Stockedge, Trendlyne-Golden, Trendlyne-Death, Screener-Golden, Screener-Death, Chartink-manually search for it, Tradingview - you gotta set it up.

This is the first step towards reading a candlestick chart. 




Disclaimer
We are not SEBI/IRDA registered. The information provided herein is for education purposes only. We will not be responsible for any of your profit/loss with this channel's suggestions. Consult your financial advisor before making any decisions.
Top Comments
Pro Community Angel Pro Community Angel
Link Copied

Bhai these things work ? 

Never had keen interest in technical analysis, although did a few courses on it (basics and intermediate level).

I dont know why (reading charts) feels like shooting in empty air, i.e. tukka. 

I know its a perspective problem but asking as a learner.

Deal Subedar Deal Subedar
Link Copied

"I dont know why (reading charts) feels like shooting in empty air, i.e. tukka."

That's because you are an investor not a trader. There is nothing wrong with that. Your main objective is to make money(whose isn't?). That's why trading feels like a headache coming in.

Trading is a whole passion, you have got to love it to learn it, like most things in life.

Trading is a full time job. A trader's mind is always thinking about the stock market.

You can learn if you buck down and try but being an investor is also hugely rewarding,  as you get to follow other passions and still make money with stock market.

Tech Guru Tech Guru
Link Copied

Works bhai. It works. Because it's purely mathematics. 🙂🙂🙂 

Tech Guru Tech Guru
Link Copied
@bikidas2060 • Can you predict future ( of a stock price) with just math? That too just simple math!

• If Yes then Why wouldn't talented mathematicians and  computers ( Algorithms and Neural network based prediction )  work  far better than any average human brain individually or collectively can achieve?

• If markets rise and fall by the world events and human (investor and day traders) emotions/intuitions What math do you apply to measure and predict that?
74 Comments  |  
38 Dimers
  • Sort By
Pro Shopping Friend Pro Shopping Friend
Link Copied
Good post bhai. 20 EMA & 50 EMA on Weekly basis are Laxman Rekha. 
View 3 more replies
Pro Community Angel Pro Community Angel
Link Copied

Bhai these things work ? 

Never had keen interest in technical analysis, although did a few courses on it (basics and intermediate level).

I dont know why (reading charts) feels like shooting in empty air, i.e. tukka. 

I know its a perspective problem but asking as a learner.

Tech Guru Tech Guru
Link Copied

Works bhai. It works. Because it's purely mathematics. 🙂🙂🙂 

View 16 more replies
Deal Captain Deal Captain
Link Copied

Nice and informative Bhai

Helpful Helpful
Link Copied
Chalo fatafat ab TV premium bhi dedo bhai ♥️
Freebie Finder Freebie Finder
Link Copied

Good bro 👍👍👍, aise hi training dete raho, I'm also trying to learn these days. The chart plays a very important role in getting the right time to enter and exit. 

You can tag me next time. Thanks.

Benevolent Benevolent
Link Copied

Great analysis of candlestick patterns 👏 I am still a novice and trying to learn gradually.Vu fire & bookmarked.

Deal Cadet Deal Cadet
Link Copied

Every chart respects different ema(50,100,150,200 etc) and we can trade in cash market on such indicators.

Deal Cadet Deal Cadet
Link Copied

Emotional stability (psychology) far important that any Analysis

Deal Cadet Deal Cadet
Link Copied

Nicely said

View 6 more replies
Deal Cadet Deal Cadet
Link Copied

Pls keep this series going, want to learn more about technical analysis.

Deal Lieutenant Deal Lieutenant
Link Copied

@bikidas2060 any PA book suggestion ?

currently tempted to read al brooks

Tech Guru Tech Guru
Link Copied

Bhai PA book kya hai? 😲

View 4 more replies
Community Angel Community Angel
Link Copied
Thanks
Helpful Helpful
Link Copied

Good Post Bhai, vu

Freebie Finder Freebie Finder
Link Copied

Very informative, Vu.

Deal Newbie Deal Newbie
Link Copied

It works but u need to be with one setup don't try to follow multiple things.

Deal Newbie Deal Newbie
Link Copied

These are just basics. Knowing these alone won't make you profitable as a trader. Try to delve into greeks and learn reading data flows.

Tech Guru Tech Guru
Link Copied

If you dont know basics you won't be able to know the advanced stuff. 

View 4 more replies
Deal Subedar Deal Subedar
Link Copied

I am more of an investor than trader and don't have enough energy for trading, But I was talking to analytics guy (10+ YOE in FAANG) and he showed me Tom Demark Sequential. The setups seems like accurate if you use some fundamentals along with TA. If anyone into trading, have a look at TD indicators.

View 1 more reply
Post Emperor Post Emperor
Link Copied

Thanks Bhai

Deal Newbie Deal Newbie
Link Copied

Nice information 

Deal Cadet Deal Cadet
Link Copied

What are alternates of charting platforms. I use Tradingview, used premium for some time, but it is expensive. Free version is very basic and has a lot of restrictions

Critic Critic
Link Copied

Use chartink

View 2 more replies
Critic Critic
Link Copied

Thanks. I'll be delving deeper into TA from start of next month. Timing is important in market - though it's not possible to have full control over it, still it helps considerably to have more insight of levels. 

If you can share a link to a video of setting these parameters in trading view it will be helpful.

Deal Cadet Deal Cadet
Link Copied

Thank u 

Deal Captain Deal Captain
Link Copied

Bhai what is your opinion about creating GTTs to buy on dips. Does it work?

Deal Newbie Deal Newbie
Link Copied

While it was interesting to read this informative piece... I have my own apprehensions of how these things are actually effective

Deal Cadet Deal Cadet
Link Copied

COVID ke time market was at 50-80% discount..kaunsa candle use kiye ? And everyone Darr k bhaag gai

Deal Captain Deal Captain
Link Copied

Only candles in balcony

View 5 more replies
Helpful Helpful
Link Copied

VU + KG Bhai. Please tag me too in your Guides & Tutorials from next time. 🙏🏻

Thanks 

replyuser
Click here to reply
Reply