Posted by : Neha Gupta

When you start developing interest in Technical analysis, Candlestick is among few of those tools one begins with. There are many different kinds of stock charts in use, but Japanese candlesticks are probably the most commonly used by experts all over the world. Experts in technical analysis say it wasn't like that, candlestick was not so popular in the west as it was in Japan, I guess we are just lucky to be born in this era of fast communication and learning across oceans.

This style of charting is considered to have its roots in the Edo-period rice markets of Japan. Historians estimate that they took their present form in the latter half of the Meiji period (late 1800s). Originally, they were just sticks drawn in red or black.

Time-frame plays a very important role in Candlesticks learning. In a daily chart a single green or red candle expresses price movements for a single day; in a weekly chart a single candle expresses price movements for an entire week. Some traders even use lower time frames for instance 5 minute charts or 60 minute charts.

The graph below shows different types of red & green daily candles.

Candlesticks are very similar to bar charts in many ways, but I find candlestick to be easier & quicker to read. The thick part of the candlestick is called the real body. It represents the range of the stock’s opening & closing. Thin lines above & below the real body are called shadows.

When colour of the real body is green it means the close of the session was higher than the open. If the real body is red it expresses that the close of the session was lower than the open. Shadow above the real body is known as the upper shadow & under the real body is called lower shadow. Top price of the upper shadow is the high of session & low price of the lower shadow is the low of the session.

Posted by : Neha Gupta

Stoploss. Don't we hear this word multiple times in a day, no matter which channel you're watching and who the analyst is. When we hear this all the time the question that comes to the mind is that, is placing a stoploss really necessary & if so how? So let's discuss the necessity and importance of stoploss.  

My simple answer is yes! Whether you are trading in leverage or even investing in cash one must have a stoploss in every order he or she places.

The most common thing I have heard people saying is keep your stop losses where it doesn't hurt you to loose. I think this exactly where people go wrong. Whether you are a Fundamental Analyst or technical Analyst your system must have a stoploss strategy and it should be able to predict stoplosses along with the entry & exit levels; if it does not your system is incomplete. What the market does, is it follows certain supports & resistances, it does not depend on our pockets & how much we can afford to loose.

When you are developing a system and trying it in the market you should keep in mind that your system has to be capable of providing you with multiple targets that way you can compare your stoploss with the first target or second target and compare your risk with the expecting returns.

Further if you place a trade and the market starts moving according to your expectations you can alter the previous stoploss & place a new one, with the help of a trailing stoploss strategy. You can maximize returns using stoploss & trailing stoploss strategies but this totally depends on the tools you are using.