Stock trading methods based on technical analysis

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Unlike fundamental analysis, technical analysis strategy focuses on price movement, thereby helping investors identify trends and market entry points more effectively and accurately. In technical analysis of stocks, there are many different trading methods, but the most prominent are still three methods: price action trading, trend trading, and technical indicator trading. In the lesson below, we learn about these exciting stock trading methods.

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  1. Price action trading

Price Action (PA) is a price action trading method used to predict the next direction of the stock market through price data.

Price Action stock traders believe that the market is efficient and that all information and news in the market, whether good or bad, is reflected in the price chart. Therefore, price is the only information they need, and trading will be done on a bare chart, without any indicators or technical tools combined.

The most popular stock trading methods today make for investors to find entry points to the market more efficiently and accurately.

Trading on price action requires investors to have the knowledge, observation skills, and good market analysis ability because Price action does not give trading signals from indicators. Instead, investors must actively judge based on the actual movements of the market through candlestick patterns or price patterns on trading charts.

With the Price Action trading method, there are four most used patterns, which are:

  • Inside bar model
  • Outside bar model
  • Model Pin bar
  • Fakey bar model
  • Or popular pricing models like:

Triangle pattern

  • Pennant pattern
  • Head and shoulders pattern
  • Rectangular pattern
  • Cup and handles model
  • Head and Shoulders price pattern
  • Double Tops Pattern
  • Double Bottoms
  1. Trend Trading

Trend trading is a type of trading that captures profit opportunities through analyzing the growth of an asset or a product in a particular direction.

The market has three main trend directions:

  • An uptrend is a period of bullish market movement, represented by a series of higher highs and higher lows over time.
  • A downtrend is a period of bearish market movement characterized by lower highs and lower troughs over time.
  • Sideways is when the market moves in a specific price zone, where the next top is = the previous high, and the following low is = the previous low.
The most popular stock trading methods today make for investors to find entry points to the market more efficiently and accurately.

Commonly used indicator tools in trend trading
Trend traders will enter buy orders in an uptrend and vice versa and enter sell orders when the trend is down. And depending on the type of trend, the trader will have a different trading strategy.

Here are two basic methods to identify trends:

  • Technical indicators (Moving Average), MACD indicator, ADX indicator, …)
  • Trend lines and trend channels
  1. Trade according to technical indicators

Technical indicator trading uses indicator tools to determine entry and exit points and trade management rules.

A technical indicator is a calculation tool based on the price, volume, or open interest data of a security to determine trends, market strength, or make predictions about price changes Future.

The most popular stock trading methods today make for investors to find entry points to the market more efficiently and accurately.

Classification of the most popular technical indicators today:

Trend following: Used to assess the current trend of the market and future possibilities.

  • MACD
  • Parabolic Sar
  • CCI (commodity channel index)

Momentum indicator: Used to determine the rate of price change.

  • RSI (relative strength index)
  • Stochastic
  • ROC

Volume indicators: Calculate a combination of price and trading volume to determine trend strength

  • MFI (money flow index)
  • OBV (on balance volume)

Volatility indicators: Used to measure volatility and trend strength.

  • Bollinger band
  • ATR (true average range)
  • ADX (average directional movement index)


We can say that technical analysis methods create diversity for stock traders with various technical indicators and price patterns. Traders can freely choose a trading style that suits their skills, experience, and goals. With the above summary, hopefully, investors can choose suitable stock trading methods to apply to the US stock market.

Read more: US stocks

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