Essential technical indicators that beginner stock investors need to know, from candlestick charts to trading volume

Beginner investors often encounter complex technical indicators and charts when starting stock trading. Terms like support line, resistance line, moving average, OBV can feel unfamiliar, but in reality, they are just tools to make investment decisions more systematic. In this article, we will gradually explore from the basics of candlestick charts, support and resistance lines, moving averages, and volume indicators to practical application methods.

Reading Candlestick Charts: Visualizing Price Movements

When you access a trading platform, the first thing that catches your eye is the candlestick chart. This is the candlestick chart, the most widely used chart format in stock investing. It may look complicated to beginners, but candlestick charts are simply tools that visually represent price fluctuations.

Bullish and Bearish Candles: Reading Market Sentiment by Color

The first thing to notice on a candlestick chart is the color of the candles. Generally, when prices rise, the candle is green( bullish), and when prices fall, it is red( bearish). In domestic platforms, bullish candles may be shown in red and bearish in blue, but the principle remains the same.

Understanding what each part of the candle signifies makes chart analysis much easier. The thick part, called the real body(, represents the opening and closing prices. A longer real body indicates greater price movement during that period. The thin lines extending above and below the body, called shadows), show the high and low prices for that period.

Particularly important are the shadows’ meanings. For example, a long upper shadow on a bearish candle indicates that prices rose temporarily but then fell back, suggesting weakening upward pressure. Conversely, a long upper shadow on a bullish candle indicates buying interest but inability to sustain higher levels, which may hint at potential decline in the next period.

( Choosing Time Frames for Candlestick Charts

Candlestick charts can be adjusted from 1-minute to monthly intervals, making them useful for both short-term swing traders and long-term investors. Selecting a time frame suitable for your trading style helps clarify whether you are observing short-term volatility or long-term trends.

Support and Resistance Lines: Finding Price Boundaries

Next, an important concept is support and resistance lines. These two are intuitive yet highly practical investment tools.

) Support Line: Halting Price Declines

In stock trading, you often see prices repeatedly hitting a certain bottom level. Connecting these points creates a support line. Support lines indicate zones where investor buying sentiment is strong. When prices bounce near support, there’s a higher chance of upward movement. However, if the price breaks below the support line, a continued downtrend may follow, so caution is needed.

Resistance Line: Drawing the Ceiling of Upward Movement

Resistance line is the opposite of support; it marks the upper boundary where prices tend to rebound. When prices approach resistance and then fall back, a decline might be imminent, suggesting a potential sell point. Conversely, a strong breakthrough above resistance and continued rise signals a sustained upward trend.

It’s important to remember that support and resistance lines are not absolute. If the price breaks through these levels, their roles can change. For example, once resistance is broken, it often becomes a new support level.

Moving Averages: Clarifying Trends

The term “이평선” frequently appears in stock-related news, which is short for moving average. A moving average is a line that shows the average price over a specific period, such as 5-day, 20-day, or 60-day averages. Based on trading days, 5-day averages roughly correspond to one week, 20-day to about one month, and 60-day to approximately three months.

The main advantage of moving averages is filtering out short-term noise to reveal the true trend. Even amid rapid fluctuations, observing the moving average helps determine whether the market is generally trending upward or downward.

Meaning of Moving Average Arrangement: Bullish and Bearish Alignment

How multiple moving averages are arranged also provides important information. When the short-term moving average### 5-day### is above the long-term moving average( 60-day), it is called a bullish alignment, indicating a rising trend as recent prices are higher. Conversely, if the long-term average is above the short-term, it is a bearish alignment, suggesting a downtrend.

Even if the current price is rising, a prolonged bearish alignment warrants cautious interpretation—whether it’s a short-term rebound or a genuine upward trend.

( Golden Cross and Dead Cross: Investment Signals

A very effective way for beginners to use moving averages is to look for Golden Cross and Dead Cross signals. A Golden Cross occurs when the short-term moving average crosses above the long-term average, signaling a buy opportunity. A Dead Cross happens when the short-term average crosses below the long-term, indicating a potential sell signal.

While relying solely on moving averages can inform investment decisions, combining them with other indicators enhances reliability.

OBV Indicator: Reading the Truth Through Volume

Finally, we examine the OBV) On Balance Volume### indicator, a cumulative volume indicator. OBV is based on the principle that “volume precedes price,” making it very useful for assessing buying and selling strength.

OBV is calculated by adding volume on days when prices rise and subtracting volume on days when prices fall. For example, if prices increase but OBV shows little change, it signals weakening buying momentum. This suggests that the upward trend may not sustain.

In technical analysis, it is crucial to check not only support and resistance lines, moving averages, but also volume indicators. If prices rise without sufficient volume, the upward movement may lack conviction.

Why Use These Indicators Together

Beginners often rely on a single indicator. However, wise investors combine multiple signals for better judgment. For example, if a candlestick shows a strong bullish candle, the price is above support, moving averages are in a bullish alignment, and volume is increasing, the upward signal is very strong. Conversely, conflicting signals call for more cautious observation.

In Conclusion

We covered candlestick patterns, support and resistance lines, moving averages, and volume indicators. While it may seem challenging at first, understanding each tool’s role makes investment decisions more systematic. Most importantly, these indicators are not just concepts to memorize but practical tools to read the market. Consistent practice, reviewing your trading records, and applying these tools will help you make smarter, more informed investment decisions.