Best indicators of technical analysis

 We all know the stock market is a great investment opportunity but selecting The one for you can be quite a task. In India, we have more than 5000 companies listed on stock exchanges like the Bombay stock exchange or the national stock exchange. So it is tough to choose the right stock which will outperform especially for amateurs. 95 % of people lose money in the stock market. and the reason behind it is the lack of knowledge. People confuse the stock market with gambling and often end up losing their capital. A detailed study about the company and market is mandatory if you want to succeed in the stock market. So below are some stock market indicators you should know. 

1.What is a technical analysis of stocks?

There are two ways to select stocks: fundamental analysis and technical analysis. When an individual selects stocks based on their past performance and candlestick charts it is known as technical analysis. 

2. Best indicators for technical analysis. 

● PE ratio 

The price to earnings ratio is the ratio that values the share of a company based on its current share price and its earnings per share. Price to earnings ratio is used by investors and researchers to determine the true value of a company's share. It can help us compare the stock of the company with the stock of other companies as well as with its historical performances. In layman's words, it helps us identify if the company's share is undervalued or overvalued. Now that you know what the PE ratio is, the question arises what is a good PE ratio? However, there is no certain number that is a perfect PE ratio depending on the market conditions, nature of the industry and many more factors. So investors should compare the p/e ratio with the different companies of the same industry. The happy ratio indicates the risk of value trap investment whereas the low ratio indicates the subpar performance of the company. 

● Debt to equity ratio. 

The debt to equity ratio is an indicator that can help us know the company's debt and financials. It is the ratio of a company's debt to a company's equity. The higher debt to equity ratio indicates

the risk involved in the company. You can also compare companies debt to equity ratio with the other companies of the same sector to examine the company's financials. Low debt to equity ratio indicates a loaded company. The debt to equity ratio can help us find companies with high debt which are risky to invest in. Debt to equity ratio from 1 to 1.5 is considered good. 

To find debt-free companies you can go to a finology screener and you will get the stock of your requirement within a second. 

Why the debt of a company is an important factor while choosing a stock. 

1. Debt-free companies give comparatively higher returns and dividend yields. 2. A debt-free company indicates good financial management. As they make efficient use of their equity capital. 

3. Debt-free companies are less likely to go bankrupt so for those who want to invest in less risky companies debt free companies are for you. 

4. Debt-free companies are not affected even in recessions so they give good returns even in economic slowdowns 

3. Choosing the right strategy. 

There are mainly two approaches to perform technical analysis top-down and bottom-up choosing the right one is important so let's understand what these strategies are. 

● Top-down 

Top-down is a macroeconomic approach. This approach looks at the overall economy before a particular stock. So a trader who uses this strategy generally studies the market or the economy before selecting a stock. Traders who use this strategy focus on short term gains. 

● Bottom-up 

The bottom down strategy focuses on 

individual stocks before the economy. In this strategy, traders analyse the fundamentally strong stocks and trade them for the long term using technical analysis. 

Apart from this, there are many more basic strategies which one can choose. Now let's understand more about how to choose the right strategy for successful trading using technical analysis.

How to choose the right strategy. 

There are many types and ways in which traders can opt to trade for which different techniques of analysis are used. You have to choose the right strategy for technical analysis. Traders often start their journey with an understanding of the candlestick charts to analyse the market and then decide their strategy. Most beginners start with a simple strategy like a crossover. It is also very important to choose the right broker which offers all the needed services in minimum brokerage. Also do not forget to use the advanced tools and software which will help you to analyse the stocks and markets. 

To put it in a few words, selecting a stock to invest in or trade can be difficult but it is very significant to pick the right one to book the profits. You can use all the different methods given above to analyse the stocks for yourself. The stock market is not an easy game to play; it requires research, analysis and a lot of effort. So before you think of gaining double returns in the stock market learn to research and analyse the markets to find your multibagger. Now, what are you waiting for, to research wisely, select your favourite stock and start investing!! 

Happy investing!!