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Technical analysis of stocks
is a vague concept to most who have no clue about charts and technical
indicators. Most people spend a lot of time studying indicators for
notions of what price will do. They spent a lot of time on these
technical indicators for their technical analysis and then they don't even
follow them.
Sounds brilliant, huh. I
just wanted to tell you what happens to most especially those who get too
involved with technical indicators. And don't even get me started on
the "intuitive crowd" that trades by the seat of their pants
thinking that they have special access to their gut instinct when most of
the time they're overwhelmed by their own emotions.
Usually many traders to get
involved with technical analysis are traders who are emotionally scared of
the markets and trying to look busy studying technical analysis. Real,
moneymaking traders who actually want to get into the business of making
money usually don't get too involved with technical indicators. Some use
and to a limited extent. But, real traders who are aggressively
pursuing trading is the business must use chart analysis and chart
patterns for his act entry and exit points for their trades.
It is important to
differentiate between technical analysis indicators and technical analysis
with chart pattern studies. I've seen more people confuse themselves with
technical indicators such as oscillators, moving averages, bands and
channels... not that those are bad but traders have a hard time in general
trusting those indicators. And lack of trust in your trading method will
cause trouble and will significantly delay your success.
So let's get to a point here.
In technical analysis of Stock your going to want to figure out the
direction of the trend on the swing, the midterm trend in the long term
trend. Once you arrive at trend and you can determine whether the stock is
in a trend or not or is in a sideways channel or a consolidating chart
pattern such as a triangle consolidation.
For me, I've learned that you
need to discover a method of entry and exit that is extremely clear so you
will act once the emotions are running high in you I correctly. Also it is
important that your stop loss is very clear so you cannot make excuses
later for changing your stop loss. On top of that your technical
analysis needs to help you find high probability events for good price
movement in your favor. More on that later...
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