What do you mean by SGX Nifty?
SGX Nifty refers to the Singapore Exchange (SGX) Nifty Futures. It is said to be a financial product through which investors have been given an opportunity to be exposed to changes in the Nifty movement. The Nifty 50 is an index of the top 50 companies listed on the National Stock Exchange of India.
SGX Nifty can thus be eventually credited for allowing traders residing outside of India to take up long short positions in the Indian stock market. Being traded in Singapore, it follows the time there, allowing extended hours to that of the Indian market. In other words, it gave an avenue to the investors’ community to react to the global events or news that in one way or another had an impact upon the Indian market after the closing of the NSE.
The Importance of Technical Analysis
Technical analysis is a method used to analyze and forecast the future price movements of financial instruments such as stocks, commodities, and indices. It records prior data related to price behavior and trading volume in the determination of future patterns and trends. Technical analysis is from the standpoint of market activity, not that of the financial health or future prospects of a company.
This is why technical analysis is important because it uses the information to make a decision. By using historical price movements and volumes of trade to arrive at a decision, the trader can determine the trends of the security in question, its support and resistance levels, or possible reversal points, which will help him to enter or exit a trade with the view of maximizing his profits while reducing the losses.
For instance the given the SGX Nifty has been rising in a consistent manner, then according to a technical analysis, the trend would be an uptrend and thus would go long expecting more gains, on the contrary, given the SGX Nifty has indicated falling, he may have made a choice to sell or not make purchases.
Regarding how SGX Nifty affects the Indian market
SGX Nifty is a futures contract on the Nifty 50, an index of the 50 top companies listed on the National Stock Exchange (NSE) in India. Although the SGX Nifty is traded on the Singapore Exchange, its role in influencing the Indian stock market extends fine enough.
Time Zone Advantage: One of the key reasons why SGX Nifty is important is the fact that it commences its trading much earlier, before the Indian stock market. This, in itself, gives a lot of information to the investor and trader community about what the next developments may be in the Indian bourses. For example, if SGX Nifty is trading upwards, it gives the signal that the Indian market will open upwards. On the contrary, it can be an opening lower.
Global Market Effect: As the SGX Nifty is traded outside India, it reacts very fast with all the news and developments of the global markets. Such entails major economic announcements of any economy, political developments taking place, and changes happening in other international markets. Therefore, with the trading of the SGX Nifty itself, a trader would be able to know how global events will have an impact on an Indian market even before its opening.
Investor Sentiment: The SGX Nifty carries the underlying investor sentiment about the Indian market. When the investors feel optimistic, SGX Nifty trades at a higher level; when it is downbeat, SGX Nifty trades lower—and very often this carries through to the Indian stock market when it opens for trade.
Hedging and arbitrage: Hedging and arbitrage is also conducted using SGX Nifty by the institutional investors, hedge funds, or long only funds broadly. They also deploy them to benefit from price differentiation between the SGX Nifty and the actual Nifty 50 index. These activities can impact demand and supply dynamics, consequently setting the opening direction of the Indian market.
What Is Technical Analysis?
Technical analysis is a technique used to evaluate and forecast the future price movement of a security. When considering the firm’s financial health or the conditions prevailing in its industry, technical analysts make use of charts and data based on price history. This information may help them figure out patterns and trends to be used as clues about what may happen next with the price of that asset.
Technical Analysis in Trading—The End Goal
The investors or traders are to make a decision guided by technical analysis. Traders expect that by understanding how prices have moved in the past, they will be capable of some partial predictability of movements in the future and that this will emanate from the understanding of when to buy or sell a stock. For example, if a share price moves in a way upwards, a trader is likely to find it appropriate to buy, hoping to make a profit on such trends.
Technical Analysis Tools
Charts: Charts are graphical representations, which describe price movements over time, in a given market.
Line Charts:
A line graph connects the closing prices of a security during a given period of time.
Easy to read and overall plain for the trend.
Bar Charts:
Bar charts show the opening and closing prices, as well as the high and low for each period (such as a day).
Every bar contains a vertical line showing high and low and horizontal lines on the left and right for open and close.
Candlestick Charts:
Candlestick charts are more of a candle look than bar charts. They reveal just the same quantities of facts as bar charts bar graphs do but are more pictorial and pleasing on the eye.
If the close is higher than the open, then most of the time it is green or white, and if lower, then red or black.
Indicators: These are devices that help the trader in reading and analyzing the trend of the market.
Moving Averages: They smooth out price data to show the average price over a period. Some common types include Simple Moving Average (SMA) and Exponential Moving Average (EMA).
Relative Strength Index: RSI tends to measure the speed and change of price movements.
It is oscillating between 0 and 100. A reading above 70 means overbought, and the price may fall, while the opposite of it happens when the reading is below.
MACD is Moving Average Convergence Divergence: The MACD reading depicts the relationship between two moving averages.
It helps in identifying buy and sell signals.
Techniques to Analyze SGX Nifty
Trend analysis
Trend analysis gives us an understanding and the feel of the direction in which the SGX Nifty is headed. Various types of charts—line charts, bar and candlestick charts—can be used to infer or identify a trend. Trends can be said to be either upward or upward, reflected through the overall notion that securities are being spent in excess of. Other types of indicators can be Moving Averages. It shows the following:.
It is assumed an uptrend if the price of the security is currently high over the moving average and vice versa for low prices.
Support and Resistance Diagrams
The support and resistance levels are like the floor and ceiling of a stock’s price. Support is the price level at which a stock tends to stop falling and bounce back; resistance means where it tends to stop its upward move and falls back. These levels can be found in viewing past price charts as the previous low and high. It can help you better understand the levels if you draw horizontal lines at these points.
Volume Analysis
Volume analysis simply considers the number of shares traded. High volume will translate into more people trading. If prices are either moving up or lower on a high volume, then the trend has more strength and reliability. If prices are changing and the volume is low, then it could be very indicative. For example, if SGX Nifty suddenly shoots up with high volume, it could indicate a very brilliant uptrend, but it starts rising on low volume; the uptrend is likely to reverse by then.
Use of the Technical Analysis in SGX Nifty
Step-by-Step Guide:
Select a Tool: Trace SGX Nifty charts using TradingView or MetaTrader.
Choose the Frame: Timeframe you want to focus your trade activities on Let’s say daily or weekly.
Identify the Trend : Observe the chart and see if the market is trending in an uptrend (prices on the rise), downtrend (prices on the dip), or sideways trend (prices remaining stable).
Define Support and Resistance ENHANCEMENTS: The support fetches the price very often to hesitate and go back up. Resistance is where the price often takes a break from going higher and makes a turn down.
Involve triggers: Add on indicators such as Moving Averages (average price over time), RSI (market either overbought or oversold), and MACD (changes in trend).
Examine the Volume: Check the amount of trading volume to confirm how strong the trend is. Strong interest on the market is automatically indicated by high volume.
Errors, Which Should Be Avoided
Over-thinking Analysis: If you use too many indicators, it just makes your analysis become confusing, and people won’t follow. Stick to a few key indicators that you know very well. Simple strategies will often be more effective and easier to manage.
I’am supposed to react: Market developments and news have great influence over stock prices. If the latest economic report or an important company announcement is missed for some reason, this could lead to bad trading decisions. Be informed to make better decisions.
Trading with Emotion: Trading upon the emotions, fear or greed may easily result in big losses. One has to stick to the trading plan and strategies established earlier. Decide based on analysis, not on emotions.
Conclusion
In this blog, we learned what SGX Nifty is and what has made SGX Nifty so important. We studied the basics of technical analysis and its most important tools and techniques, namely, charts, indicators, and patterns. Herein, we elaborated again on how these techniques are applied by using SGX Nifty.
Practice makes one perfect at technical analysis. Repeatedly try the following techniques. Be updated about the market trends.