Basic Terms used in Technical Analysis:

To understand technical analysis, one has to be familiar with the various basic terms associated with it.

Open: It is the price of the first trade in a particular period. For example, in an intraday chart, it is the first price at which it traded at the start of the day or on an hourly chart, it is the first price at which it traded at the start of the hour.

High: It is the highest price a stock traded during a particular period. For example, in an intraday chart, it is the highest price of the security on that day. It is at this price the stock had more sellers than buyers, creating selling pressure.

Low: It is the lowest price that the stock traded during a particular period. For example, in an intraday chart, it is the lowest price of the security for that day. It is the price the stock had more buyers than sellers creating a buying pressure.

Close: It is the last price at which the stock traded during a particular period. For example, in an intraday chart, it is the last traded price of the stock on that day.

Volume: It is the number of shares traded during a particular period or the number of shares that changed hands. The movement in price has to be supported by reasonable volumes.

Open Interest: Open Interest in the future and options market represents the number of contracts that have open positions. It means those contracts that are still open in the market and have not been closed or exercised.

Bid Price: It is the price at which a buyer is willing to pay for a share.

Ask Price: It is the price at which a seller is willing to sell a share.

Technical Charts: It provides information on historical and current movement in prices.

Types of Charts:

These are some basic forms of charts that traders use.

Line Chart: It is a line joining the closing prices of a share for a particular period that forms the line chart. In a Daily chart, the line is drawn by connecting the closing price for each day while in a 5-minute line chart, it is drawn by connecting the closing of the price of the share every 5 minutes.

Bar Chart: The Bar chart shows the open, high, low, and close price of a share, all on a single bar. The pictures that are shown below are that of a bearish and bullish bar. It has two ticks attached to it on both sides. When the open price is higher than the close price, the left tick will be higher than the right one and is called a bearish bar. Similarly, when an open price is lower than the close price, the left tick will be lower and is called a bullish bar.

Candlestick Chart:

These charts are similar to those of bar charts to some extent. The difference is that the open and close prices can be seen on the body of the candle instead of a tick. The color of the candle tells us whether it is bullish or bearish. While a bullish candle has its body-colored in green, blue, or white, a bearish candle has its body in red or black.