Analysis Of Charts

Hello you wonderful and intelligent people that make up this forum. I do hope you are doing well.

I have been learning alot about trading and looking at moving averages, volumes etc. I have conducted a few trades and made a profit. I tend to follow a checklist. I kindly wondered please what candles people look for i know some people can predict when the share is at a bottom and will start rising again. Does anyone know what software i can use to detect these certain candles and what do they look like please?

Thank you again for any support you can give, i would truly appreciate it. I do hope you are enjoying your weekend. Many thanks for your support.

I don’t have a software but I have heard trading view is pretty good

I would not go so far as to say someone can ‘predict’ how stock will behave. Technical analysis is imo a game of probability if done well. I try to use fundamental analysis to find stocks I want to invest in and technical analysis to guide me to a ‘good’ entry point

Trading purely on TA data is too risky for me but I admit that I am not good at it so that’s my take

Always dyor


No person or software can pick a ‘bottom’ better than just random guessing. Be careful as people will try and sell you their software and claim they can predict things based on past performance but no-one knows the future short term movements.

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Thank you very much for responding, you are both amazing people. As i try learn more about trading i really appreciate your responses.

JustLookingThx i think combining fundamental analysis with technical analysis to guide you to a good entry point is very clever. Thank you very much for sharing this and i will check out trading view.

trader787 thanks very much for your feedback. I know some people look for certain candlesticks to predict trends and i know short term movements are not certain. Do you please have any advice on this and how i can learn more about this? I tend to be trading using moving averages and volumes, but i wanted to kindly learn more about looking for certain trends or clues in the charts please?

Thanks again for your support i am very grateful for your time. Thanks for reaching back out to me and hope you have a super weekend.

Take some time and read part 2 (section 6 is best for you) of this free book

TL:Dr: stock prices are random so trying to predict where they are going by whatever method is not worth the effort.


Look, as it has been suggested here, there is no magic formula (besides Joel Greenblatt’s MagicFormula of course), and even to this day, pure technical analysis is still considered like voodoo by academics.

That being said, there is knowledge (if not money) in reading charts, as charts do hold the condensed summary of a highly chaotic system comprised of very human people. Unknown bias, herd behaviour and inflexible robots’ codes are king of the price action, and certain patterns do emerge. (Not talking about candlestick patterns, but behavioural patterns).

If my memory serves well, I believe investopedia holds a wide variety of mini guides, with a fairly decent collection about TA alone. Lots of indicators, patterns and such.

But as it as been suggested already, I would prefer not to limit the scope of one’s research, and gradually expands it with some fundamental analysis, and why not some actual financial modelling.

Or if pure TA is really really your thing, I remember stumbling upon Astrological Trading a few years back :joy:

Sorry for TA nerds, I don’t mean to be a downer or anything, I do like some TA myself as an exercise of big data visualization ; but it’s just fundamental efficient market hypothesis. You can find tradable alpha (read “money”) only in situations where the EMH breaks down. Pure TA is just textbook weak EMH, you would literally be trading from the most accessible and least complete type of information available, where every other participants in the market know more than you. You will not find an edge, there is no edge.

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Thank you very much indeed Zergui for sharing your comments. I really appreciate it you have been very helpful and i really do appreciate your feedback.

I have been trading based on increasing volume on an uptrend and using moving averages to conduct a few trades and finding the best buying price. I think that is very intelligent and amazing advice that you would not want to limit the scope of ones research and use fundamental analysis also. I believe this will provide another layer of security when conducting trades.

Can i kindly ask please if you had any more information on these behavioural patterns that you mention in the charts please? When trading would you consider setting a stop loss for instance 10 - 15% below your buying price as an extra security measure please? I would be really thankful for any advice you can give on this, thank you so much.

Thank you so much for your support on this forum, you have been amazing. I truly appreciate the time you take to post. Have an amazing day and keep happy!

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This is a bit more of an open-ended question than you think, so I will not be able to give you a definitive answer there, but I can try and help give you some insights.

Regarding behavioural patterns, the idea is that price action will reflect the general psychology of the market participants given available informations.
That is true in the case of determining a “fair” price (say, Netflix just reported a loss of subscribers, and almost immediately the price stabilized down, finding an equilibrium agreed on by every market participants).

An other type of behavioural pattern, more closely related to TA, would be Fibonacci retracements, or supports and resistances.
Let’s look at these two examples; in the case of Fibonacci retracements, which are based on the Golden Ratio, to some extent, actors in the market will unconsciously favour a price retracement lining up on Fibonacci values, the cause of it more likely to be a subject of human psychology. Some people having observed that, started to graph on their chart such levels, and trade accordingly, in an increasingly more automated manner. This leads to a self-fulfilling prophecy, as more and more trades are conducted at these levels, making it even more observable.

In the case of supports and resistances, it is a bit of the same. If a certain security have had lots of trading activity happening at a certain level, when the same level is reached again, lots of actors will have a psychological barrier that said price is somehow important, and they will place orders accordingly; thus rendering it a price level at which lots of orders are waiting to be consumed in the trading book, and thus creating a support / resistance.

If you want some “effective TA”, that will yield you some results, the key will be to see what other participants see in your charts; if you think many people believe X price cannot be broken easily, you may try to profit from a large number of orders waiting at this price and the resulting reversal. If you go and start looking at increasingly more complex and obscure candlestick patterns, chances are you will be the only one seeing it in you chart, and your prediction of what happens next will be flawed.

EDIT: Got lost and forget about your second question. There will be no good answer for a stop loss level. This will have to be determine based on your capital reserves, the volatility of the trade, and the reason why you enter the trade. If you enter a trend-following trade, your stop loss should reflect the question “At what price is the trend broken?”. In general, the question would be “What would invalidate my trade?”, and this should give you an idea where you would want your stop-loss.
Now, trading with indicators, you would likely look at a statistical benefit, for a strategy with a certain % success. You would first look at your take-profit price, and then at the stop-loss. You need your ratio of profit over loss, based on your % success rate, to yield a positive result.
That means that some trades, you will have to not enter, if your stop-loss has to be much bigger than your take-profit would be.

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Thank you very much indeed for your very helpful post Zergui, you are a true gentleman and i really appreciate your support. I truly appreciate your support as this has given me further avenues to research as i try to become a better trader.

When you mention the fair price of Netflix, for instance if Netflix just reported a loss of subscribers and the price stabilized down. Are you stating this might be a good basis to enter a trade, if given the research it shows the stock may turnaround please?

Regarding the Fibonacci retracements, with actors in the market unconsciously favouring a price retracement lining up on Fibonacci values do you have any further examples of what you mean by this please or any examples charts i could kindly look at? Sorry to ask again but do you also have any examples of how a support and resistance can be identified on a certain stock and the best way to monitor this please? If you kindly had time to answer these remaining questions i would be forever grateful.

Thanks again for all your support, you have been really amazing and you are a wonderful person. Thanks again for all your help, i will research things further, but you have given me some really interesting areas to research further. I think i was too much focused on looking for candles in charts but this is alot more complex and it might need to be combined with fundamental analysis for the best results possible.

I cant thank you enough. On a personal note, i do hope you and your family are safe and well.

Hello Zergui i do hope you are doing well. Are you very kindly, please able to leave me your thoughts on the above if you have a short moment, even if its only a few sentences please? I appreciate you will be very busy with other commitments also. I am grateful for all the advice you have shared you are an amazing person. Thank you for being so kind and i do hope you and your family are happy and healthy. Thank you so much.

There isn’t much more I can add to the topic.

Regarding Netflix valuation specifically, the market agreed on a specific price, most of it being derived from forecasting future cash flows of the company. Any price in the market is just an equilibrium to which most agent agree on.
Is it a good price to enter a trade? Only if your own research suggests that the market’s valuation is erroneous.

On the topic of Fibonacci or support/resistance graphing, there isn’t much I can say. Try your own hands at it. Look up how these indicators, or any, are being used and set up, and try it for yourself.

At the end of the day, you are responsible for your own money, and you should trigger a trade order only when you’re confident in your profit potential, following your own research.