Module 3: Technical Analysis (Chart Reading for Traders) Flashcards
Question: What is Technical Analysis?Answer: Technical Analysis is the study of past market data, primarily price and volume, to predict future price movements.
Answer: Technical Analysis is the study of past market data, primarily price and volume, to predict future price movements.
Question: What are candlestick charts?
Answer: Candlestick charts are a type of financial chart that shows price movements over time using candlesticks, which indicate the opening, closing, high, and low prices for a period.
Question: What do green and red candlesticks represent?
Answer:
Green (or white) candlestick: Price closed higher than it opened (bullish).
Red (or black) candlestick: Price closed lower than it opened (bearish).
Question: What are support and resistance levels?
Answer:
Support: A price level where a stock tends to stop falling and may bounce back up.
Resistance: A price level where a stock tends to stop rising and may reverse downward.
Question: What is a moving average?
Answer: A moving average smooths out price data to help identify trends by calculating the average price over a specific number of periods.
Question: What are the types of moving averages?Answer:
Simple Moving Average (SMA): A straight average of past closing prices.
Exponential Moving Average (EMA): Gives more weight to recent prices, making it more responsive.
Answer:
Simple Moving Average (SMA): A straight average of past closing prices.
Exponential Moving Average (EMA): Gives more weight to recent prices, making it more responsive.
Question: What is the Relative Strength Index (RSI)?
Answer: The RSI is a momentum indicator that measures whether a stock is overbought (>70) or oversold (<30), helping traders identify possible reversals.
Question: What is MACD (Moving Average Convergence Divergence)?
Answer: MACD is a trend-following momentum indicator that shows the relationship between two moving averages of a stock’s price to identify trend strength and direction.
Question: What are Bollinger Bands?
Answer: Bollinger Bands are volatility bands placed above and below a moving average. They expand when volatility increases and contract when volatility decreases.
Question: What is volume in trading, and why does it matter?
Answer: Volume represents the number of shares traded in a stock during a period. High volume often confirms trends, while low volume can indicate weakness in price movement.
Question: What is a trend line?
Answer: A trend line is a straight line drawn on a chart to connect significant price points, showing the general direction of price movements.
Question: What are chart patterns in Technical Analysis?
Answer: Chart patterns are formations in price movement that traders use to predict future price movements. Examples include double bottoms, head and shoulders, and flags.
Question: What is a breakout in trading?
Answer: A breakout occurs when a stock price moves above a resistance level or below a support level with high volume, indicating a potential strong move in that direction.
Question: What is divergence in Technical Analysis?
Answer: Divergence happens when the price moves in the opposite direction of an indicator, such as RSI or MACD, often signaling a potential reversal.
Question: How do traders use technical indicators together?
Answer: Traders combine indicators like RSI, MACD, moving averages, and volume to confirm trends, find entry/exit points, and manage risk effectively.
