Technical analysis is the stock analysis by observing price trends and patterns seen on the chart to identify opportunities to reap profits. Traders need to do this to improve their chance to score profits and minimize their risks further. You can also do that by visiting premarket stock alerts to know more info regarding price trends and patterns.

Trust is used as a base of technical analysis.

- The stock price moves according to a certain trend.
- The pattern of price movements in the past will be repeated in the future.

The basic things that you need to know from technical analysis, namely:

- Support and resistance
- Candlestick
- Indicator

1. Resistance and support

What are those? Support is a price limit which traders believe a share purchase occurs when the price reaches that limit.

Meanwhile, resistance is a price limit where traders believe the sale of stock occurs when the price reaches this limit. You could say resistance is the opposite of support.

2. Candlestick

Candlestick is a type of price chart in technical analysis that displays the high, low, opening, and closing prices of a security for a certain period.

Starting from the use of rice traders in Japan, candlesticks became popular with stock traders.

Candlesticks are divided into two colors: green and red. Green indicates the price closed high, while red indicates closed low.

3. Stock indicators

There are several indicators used in technical analysis to observe stock price movements.

- Moving Average is a line that reflects the movement of the stock price at closing. The formation of a moving average line is divided by a certain number of days, such as 15, 30, 100, or 200 days.
- Stochastic Oscillator is an indicator of stock prices whose movement goes up to the overbought area and down to the oversold area.
- Moving Average Convergence Divergence or MACD is a stock price momentum indicator that shows a buy signal when the lines cross.
- Volume is an indicator that shows the level of buying and selling of shares.

The difference between stock trading and stock investing

Between stock trading and stock investing, there is a difference. Here are some differences even though the goal is both to seek profit.

- Term: trading stocks is short-term (short term) to gain profit, while investment waits for a long time or long term (long term) to take profit.
- Analysis: trading focuses on price patterns and movements so it tends to use technical analysis. Meanwhile, investment focuses on the company's performance and long-term prospects, so it uses fundamental analysis.
- Observation: trading is the same as monitoring the stock price daily. Meanwhile, monitor investment as necessary.
- Ratios: trading based on technical analysis using indicators (moving average, stochastic, MACD, volume). Meanwhile, stock investment based on fundamental analysis uses ratios such as PER, PBVR, ROE, to DER.