Stock Market Operation

Term Paper Synopsis

Topic: Analyze the Trend of Stock market for given time period
and formulate price-volume charts & candle stick charts

Submitted to:
Miss Manpreet Kaur,
Lecturer, L.P.U
Submitted by:
Deepika Sethi
Roll No. :1
7450070045

A market trend is a putative tendency of a financial market to move in a particular

direction over time. The terms bull market and bear market describe upward and
downward market trends, respectively, and can be used to describe either the
market as a whole or specific sectors and securities.Various trends:
1. Secular market trend: is a long-term trend that lasts 5 to 25 years and
consists of a series of sequential primary trends.
2. Secondary trends :are short-term changes in price direction within a
primary trend. The duration is a few weeks or a few months.
3. Primary trend has broad support throughout the entire market and lasts for
a year or more.

Volume is a measure of supply and demand that is independent of price. It is often

looked at for confirming evidence of price trend and price reversal patterns. Volume
by Price is a perfect indicator comprising price and volume into one instrument. The
volume of trades is depicted in the chart horizontally at price intervals.

Volume-Price chart
A horizontal histogram plotted on the chart of a security, which corresponds to the
volume of shares traded at a specific price level. Price by volume histograms are
found on the Y-axis and are used by technical traders to predict areas of
support and resistance. Large price by volume bars are used to illustrate high
buying and selling interest, and they are often regarded as a sign that the given
price level will act as a strong area of support or resistance. It is common to see the
price of an asset face little resistance when traveling between levels that have small
PBV bars, but pushing the price past areas with large PBV bars is substantially more
difficult.The only time volume is useful is when you combine it with price. For
example:
Expansion of range and high volume - If a stock is drifting along sideways in a
narrow range and all of sudden it breaks to the upside with an increase in range and
volume, then we can conclude that there is increased interest in the stock and it will
probably continue higher.

Narrow range and high volume - If a stock has very high volume for today but
the range is narrow then this is called churning. In this case, significant
accumulation or distribution is taking place.The length of each bar is determined by
the cumulative total of all volume bars for the periods during which the closing price
fell within the vertical range of the histogram bar. Example -
Candlestick chart is a style of bar-chart used primarily to describe price
movements of a security, derivative, or currency over time.

It is a combination of a line-chart and a bar-chart, in that each bar represents the

range of price movement over a given time interval. It is most often used in
technical analysis of equity and currency price patterns. They appear superficially
similar to error bars, but are unrelated.

Formation

Candlesticks are usually composed of the body (black or white), and an upper and a
lower shadow the area between the open and the close is called the real body,
price excursions above and below the realbody are called shadows. The wick
illustrates the highest and lowest traded prices of a security during the time interval
represented. The body illustrates the opening and closing trades. If the security
closed higher than it opened, the body is white or unfilled, with the opening price at
the bottom of the body and the closing price at the top. If the security closed lower
than it opened, the body is black, with the opening price at the top and the closing
price at the bottom.

A candlestick need not have either a body or a wick.In order to create a candlestick
chart, you must have a data set that contains open, high, low and close values for
each time period you want to display. The hollow or filled portion of the candlestick
is called "the body" (also referred to as "the real body"). The long thin lines above
and below the body represent the high/low range and are called "shadows" (also
referred to as "wicks" and "tails"). The high is marked by the top of the upper
shadow and the low by the bottom of the lower shadow. If the stock closes higher
than its opening price, a hollow candlestick is drawn with the bottom of the body
representing the opening price and the top of the body representing the closing
price. If the stock closes lower than its opening price, a filled candlestick is drawn
with the top of the body representing the opening price and the bottom of the body
representing the closing price.

Advantage of Candle sticks:

Compared to traditional bar charts, many traders consider candlestick charts more
visually appealing and easier to interpret. Each candlestick provides an easy-to-
decipher picture of price action. Immediately a trader can see compare the
relationship between the open and close as well as the high and low. The
relationship between the open and close is considered vital information and forms
the essence of candlesticks. Hollow candlesticks, where the close is greater than the
open, indicate buying pressure. Filled candlesticks, where the close is less than the
open, indicate selling pressure.