hey everyone thanks for checking out this video my name is Travis rose I'm
the creator of the master the market education that you can find link below
in the description and this is going to be part 3 of the day trading stocks for
beginners series so if you're someone that's brand new to the market you may
want to start off by watching part 1 and part 2 before we move on here to part 3
but anyway in this one we're gonna actually start getting into some
technical analysis which is going to help you be able to read price action
and look at charts to actually be able to predict future price action and
hopefully that will of course lead to some profits so first and foremost what
is the difference between technical analysis and another type of analysis
that we'll talk about in the future of this series which is known as
fundamental analysis technical analysis is the analysis type using patterns in
the market data to identify trends and make predictions so anytime somebody
mentions things like chart patterns indicators candlesticks volume and so on
and so forth all of these things are part of technical analysis and this is
going to differ again from fundamental analysis because fundamental analysis is
the analysis using a business's actual financial statements to predict future
price movement um so when you think about things like revenue operating
expenses net profit and so on and so forth
typical things that you would see on a company's balance sheet all of these are
part of fundamental analysis and when it comes to longer-term investing you want
to find stocks that have strong fundamentals and that have growing
financials because those are going to make better longer-term investments now
since we're focused on just day trading rather than longer-term investing here
in this series you're actually going to see that fundamental analysis isn't
going to be quite as important for day trading but there are definitely some
things that you're going to want to look into when it comes to fundamentals and
that's what we're going to talk about in the next video of this series so with
that being said the first part here with technical analysis this has to do again
with the charts in the volume and the different chart patterns that we see so
what makes up those chart patterns and makes up the charts themselves our what
are known as candlesticks when a candlestick chart is just a common chart
style used to describe price action over a set period of time so for example you
can have a five-minute chart and that means that each candle on the chart
represents five minutes of price action a one-day or a daily chart means then
that each candle is going to represent an entire day of price action so if we
take the example down at the bottom of the screen this is stock GNP X and we're
looking at the one-day one-minute chart so what that means is each candle is
representing just one minute of price action but we're looking at the span
over an entire day and again these candlesticks are what make up the charts
themselves and basically because of that they're going to be kind of the
foundation of any technical analysis that you're doing to be able to predict
future price movement so with that being said it's important that you're able to
understand how these candlesticks are made and at the end of the day why they
look the way that they do so we know that of course if it's a green
candlestick that means that it closed at a higher price than it opened and if
it's red we know that it closed at a lower price than it opened and again
this can be over any set period of time so if we're just looking at the 5-minute
chart a green candlestick just means that it moved up within that 5-minute
period and if it's red it just means that it moved down within that 5-minute
period and the colored part of the candlestick the one that we're talking
about either being green or red is what is known as the real body aside from the
real body there are two lines that stick out from the top and the bottom of these
candlesticks the one that sticks out from the top is known as the upper wick
and this is going to show us how high the price went within that period of
time and down there on the bottom you can see that there is the lower wick and
that's going to show us the lowest point that the stock went within the period of
time before that candle closed so for example if the stock opened out one
dollar and then closed later on at one dollar and ten cents we know that that
would of course be a green candle but that doesn't necessarily mean that the
stock went straight from one dollar to 110 before closing it may have went down
to 98 cents and then spiked all the way up to a dollar and 15 cents before
coming down and closing out one dollar and ten cents so that's how the real
body in the upper and lower wicks of the candlesticks are actually made up and
once you get into some technical analysis and you're able to actually
read these candlesticks all of this information can be very helpful to
actually find better trade entries and better trade exits so that's going
to lead us to the first chart formation I wouldn't necessarily call this a chart
pattern but it's kind of a formation that we see whether it be on a
one-minute chart a 5-minute chart or even a longer-term chart like the daily
or weekly chart and that is what is known as support support is a price
where stock historically has a difficult time falling below due to increased
buying or demand than selling or supply and that's something very important to
keep in mind many people don't really realize that the stock market moves
pretty much solely based on supply and demand a lot of people think that you
know when a company releases some kind of news if it's a good piece of news
they think that that news is the reason that the price is going up but really
the direct reason is because of the supply and the demand that positive news
that the company put out may affect the supply and demand meaning that there is
now more demand for the stock and less supply but again the supply and demand
is what is going to directly affect the price of the stock so again at a level
of support we know that there is just more demand for the stock than there is
supply and that makes support levels a bullish area and we can use this as an
opportunity to possibly look to buy into the stock so when you're looking at a
chart and you see something like a flat horizontal line where the stock seems to
bounce off of multiple times that's pretty much what a level of support is
going to look like and because you know that there is a spor level in the area
and you know that there's plenty of demand for the stock you can look to you
buy into the stock just above that support level and many times that can
lead to profits from the stock bouncing off support and continuing higher now
the nice thing about support is it also gives you an easy area to cut losses if
the trade happens to move against you and the reason for that is because if
the stock breaks down below support many times it's going to continue lower until
new support is formed so because of that when a stock does break down below
support it's important that you cut your losses quickly and exit out of the trade
and wait for new support to form before you buy back into the stock and just to
give you a real-life example of what support looks like here we have the
stock symbol B lph and again we're looking at the one-day one-minute chart
so this is the span of an entire day but each of
these candles is again only representing one minute of price action so the left
side of the chart where it's gray in the background that's actually pre market
trading and then once the background goes to black that's when the market
opens at 9:30 and you can see that early on in pre market the stock seems to form
a little bit of support right at about five dollars and fifty cents when the
market opens the stock spikes up a bit to about seven dollars and 40 cents
before coming back down in retesting that support at 5:50 and that's exactly
where you would probably look to buy into the stock if you were using and
watching the support level and this is a perfect example because the support does
hold and the stock is able to spike back up and actually break over the morning
time later on hitting a high of eight dollars and forty cents so went up
almost $3.00 per share just a few hours later after holding that support level
now like I mentioned this isn't always going to be the case because
unfortunately nothing is perfect in the market there are times where things go
perfectly like in the previous example here with elph but there are also times
where support looks like it's going to hold and then immediately ends up
breaking down below it so again just to remind you you can also use these
support levels as an area to cut losses if the stock does fail to hold the
support and what that may look like is down below you see that the green dot on
the chart represents where you would buy into the stock you can see that there is
a bit of support in the area so it may look like a good buy opportunity and
then pretty much right away the stock actually breaks down below that support
and again that's exactly what you would want to sell out of your shares and cut
your losses on the trade and then just wait for a better opportunity to buy at
a lower price or just completely avoid the stock and move on from the trade
entirely now on the other side of the spectrum from support we have what is
known as resistance and pretty much resistance is going to be the exact
opposite of support a resistance level is a price where a stock historically
has a difficult time breaking above due to increased selling or supply than
demand or buying so a resistance level is then going to be considered bearish
as opposed to bullish like support and we can use these resistance levels as an
opportunity to sell it currently in a long position or we can
actually look to short sell which allows us to profit from the stock coming back
down so just like support resistance is actually going to be a flat line on your
charts I mean you don't have to really calculate anything or do any kind of
advanced stuff you simply are able to see where these flat lines of support
and resistance are and all you have to do from there is just draw them on your
charts and again in this case you can use them to sell out of your position if
you previously bought shares or you can look to short sell which then will allow
you to profit from the stock failing to break above resistance and coming back
down and just as a reminder if you want to learn a little bit more about short
selling and how you can profit from stocks going down that's something that
I talked about in part 2 of the series so I recommend checking that out if you
haven't already and again that's going to be linked down below in the
description but anyway you can see that in this diagram the stocks pipes up and
seems to form a bit of resistance and that's exactly where you would want to
look to shorts out your stock or sell out of any current positions that you
are in and again just to give you a real-life example we have AMD with the
1-day one-minute chart and you can see right at about 55 dollars and 40 cents
the stock seems to form some resistance early on as soon as the market opens and
then later on throughout the day test that level multiple times and that is
exactly where you would want to sell out of your shares or even again look to
open a short position okay now again just like support resistance also can be
used as an opportunity to cut losses maybe a time where there looks to be a
perfect level of resistance and you decide to short sell the stock but later
on it breaks above that resistance and again we want to cut losses immediately
when a stock is breaking out above resistance because a lot of times they
will break out and then continue higher until new resistance is formed so it's
best for us to just cut our losses quickly and move on from the trade and
even look to possibly short sell again at a higher price when some new
resistance is formed now one very important thing about support and
resistance that many people don't realize is that past support can become
resistance and past resistance can become support so just because a stock
for it's down below a level of support
doesn't necessarily mean that you should erase that support level from your chart
because later on the stock had actually bounced back up and that passed support
can now turn into a level of resistance that's why in my opinion it's very
important to actually keep track of major support and resistance levels and
keep those lines on your charts even if the stock has since broken through them
and just to give you an idea of what this could look like over on the left
side we have a stock that has some resistance right in the middle on the
Green Dot that's where the stock breaks out above resistance and then later on
it comes back down and that past resistance is now acting as a level of
support and over on the right side we have the complete opposite happen we
have a support level in the middle of the chart the stock breaks down below
that support later on it bounces back up and that past support now turns into a
level of resistance and actually if we go over to my Twitter real fast just the
other day we had a perfect example of broken support turning into a level of
resistance so we have the stock sls that was spiking up in the morning and it
actually was halted for volatility at 9:38 in the morning while it was halted
I simply looked at the daily chart of the stock and I said that three dollars
in seventy-five cents is the next area of resistance at the time it was at
about three dollars in 30 cents I believe and later on just a few minutes
later once the stock resumed trading it spiked all the way up to three dollars
in 71 cents before it came all the way back down and later on closed below
three dollars so the way that I came up with that $3.75 area is if we look at
the daily chart of the stock you can see that on multiple different occasions 375
was a level of support later on the stock broke down below that 375 area and
here's the day that I tweeted 375 may now be a major level of resistance you
can see that the stock spike all the way up and came just four cents from hitting
that 375 area before reversed back down okay so even though it looked like the
stock broke down below that support quite a while ago it's so important to
keep in mind that that was a major level of support at one time for the stock and
now that it's broken down anytime the stock is spiking back into that
level it can now become a level of resistance all right so I hope this
video was helpful in being able to spot some different things like support and
resistance on your own and now at least you should have a good understanding of
some very basic technical analysis so that way later on in my channel when we
get into some more advanced topics and we start talking about some more
advanced strategies you're not going to feel lost and you can have a good
foundation to build off of so anyway if you enjoyed please make sure to give
this video a like and subscribe to the channel so you don't miss out on part
four of the series and as always if you want to learn everything step-by-step
from the absolute basics to the advanced trading strategies that I use to trade
stocks full-time you'll learn how to day trade swing trade and even longer-term
invest you'll be able to take seventy practice tests to make sure that you're
actually understanding everything that we're talking about in the course and
you'll even be given access to our chat room with over a thousand other active
traders all of that is included at mass in the market which will be the first
link down below in the description anyway thanks again for watching good
luck with your trading and I'll see you in part 4