How to Buy a Stock When It Touches Support and Forms a Green Candle

Step-by-Step Guide

1. Identify the Support Level
A support level is a price point where a stock tends to stop falling and may start to rise again. Think of it as a floor that the stock price struggles to break below.

• Look at past stock charts to identify levels where the price has repeatedly bounced back.
• Example: If a stock has reversed from ₹100 multiple times, ₹100 is likely the support.

2. Wait for the Stock Price to Reach the Support Level
Patience is key. Monitor the stock’s current market price (CMP) and wait for it to drop close to or touch the identified support level. Avoid rushing in prematurely.

3. Look for a Green Candle Formation
A green candle on the stock chart signifies a price increase within a specific time frame (e.g., 5 minutes, 1 hour, or daily). This is crucial:

• After the stock touches the support level, check if the next candle turns green.
• A green candle indicates that buyers are stepping in, signaling a potential price increase.

4. Confirm the Trend with Volume
Volume is the total number of shares traded. It acts as a confirmation of the trend.

• Look for higher-than-average volume when the green candle forms. This suggests strong buying interest and improves the chances of the stock moving upward.

5. Place Your Buy Order
Once the green candle forms and the volume confirms the trend, it’s time to act.

• Place your buy order near the support level.
• Always set a stop-loss below the support level to protect your investment if the price moves unexpectedly.
  • Example: If the support is ₹100, set your stop-loss at ₹95.

6. Monitor the Stock
After buying, keep an eye on the stock to ensure it moves as expected.

• Adjust your stop-loss or exit position if necessary to minimize potential losses.

Ravi’s Journey: A Beginner’s Success Story

To make this strategy more relatable, let’s look at Ravi’s story. Ravi was a beginner who often bought stocks randomly and lost money. Here’s how he turned things around:

1. Learning About Support Levels: Ravi discovered that support levels act as a floor for stock prices. By studying the chart of Stock X, he identified ₹100 as a strong support level.
2. Waiting for the Right Moment: Instead of rushing in, Ravi waited patiently for the stock to touch ₹100.
3. Spotting the Green Candle: When the price touched ₹100, Ravi noticed a red candle first but waited. Soon after, a green candle formed, signaling a potential upward move.
4. Confirming with Volume: Ravi checked the trading volume, which was higher than average—confirming strong buying interest.
5. Taking Action with a Plan: Ravi placed a buy order at ₹100 and set a stop-loss at ₹95 to manage risk.

Over the next few days, the stock climbed steadily. Ravi’s patience and strategy paid off, turning his confusion into confidence.

Key Takeaways

• Identify the support level: Look for price points where the stock has repeatedly bounced back.
• Wait for the stock to touch the support: Don’t rush; patience is key.
• Look for a green candle: This indicates buyers are stepping in.
• Confirm with volume: Ensure there’s strong buying interest.
• Set a stop-loss: Always manage your risk.

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