Learn Technical Analysis
Anyone can learn technical analysis and improve their investing and trading results! Technical analysis can be as easy or difficult as you want it to be. It depends upon the technical analysis methods you want to focus on at first. Some methods require more time and practice to be consistent with results.
Technical Analysis can be as easy as drawing a few trendlines on a stock chart or it can be as in-depth as applying wave counts using Elliott Wave theory. Fibonacci tools, when used properly, can be used to deliver consistent results.
At Trendy Stock Charts, I have technical analysis methods for beginners through advanced methods for seasoned investors.
I have found that learning a couple of techniques and then combining those techniques at one time provides the most accurate and consistent results when analyzing stock charts.
Technical analysis can be used to accurately predict buy and sell targets for stocks share prices. During volatile market conditions, it is imperative that investors develop an exit strategy for every stock they own. Buying stocks is the easy part. Knowing when to let go is no easy task. Letting go of a winning stock is harder to do than you think.
But every stock has its time to take profits, especially during longer periods of consolidation. Money can be put to work on stocks that are moving rather than consolidating. Sometimes it takes time for the stock chart to set up again and re-assess its risk to reward ratio. Technical analysis helps with all of this.
Why is selling stocks so difficult for investors? As the share price rises for a stock, investors develop a case of FOMO (Fear Of Missing Out on profits if the share price keeps rising). I've had this disease before. Almost all investors develop it at one point or another if they actively trade or invest in the markets. Beware though - FOMO is highly contagious and dangerous to profits!
By having a set plan, you can learn how to avoid catching FOMO. Technical analysis can help you to develop that plan - here are the main benefits of technical analysis:
- Identifying support and resistance areas
- Calculating upside price targets and downside risk projections
- Determining trends for stocks
- Analyzing risk to reward ratios
Technical Analysis Methods
Candlestick patterns can be used on charts of various time lengths - 5 minute charts, daily charts, weekly charts, and even monthly charts.
There are bullish and bearish patterns as well as reversal and continuation patterns.
Can you identify all the different candlestick patterns?
Wave patterns develop and can be seen on 5 minute charts, daily charts, weekly and even monthly charts. They can be seen on candlestick charts and even simple line charts.
Early identification of a wave pattern can give you very precise entry and exit points to buy and sell shares.
Applying Elliott Wave theory is a very advanced technical analysis method, but learning even some of the basic wave patterns can greatly increase your trading successes.
Moving averages are one of the "easier" technical analysis methods for the beginning investor to use and understand.
Why are moving averages so popular? Most charting and trading platforms place moving average lines on a chart for you, eliminating user error.
Golden crosses and death crosses are but just a couple of moving average indicators.
Price & Volume analysis is a form of technical analysis using two widely available technical indicators, share price and the number of shares traded.
Price & volume for stocks can be found in most financial publications.
Applying my "3 Volume Spike Theory" can give you an early indication of the beginning and end of trends.
Chart patterns are powerful tools that can be used to predict share price movements.
Since computer programs and algorithms dominate today's trading activity, it is not uncommon to see chart patterns repeat themselves on different stock charts.
Are you familiar with a "Cup With Handle" chart pattern?
Fibonacci analysis can be used in many areas of technical analysis, such as calculating a stock's risk to reward ratio.
Fibonacci Analysis is known to calculate very specific support & resistance areas for stocks that can be used as entry & exit prices when buying and selling shares.
I discuss how to place Fibonacci trading tools on charts, including tips, techniques and pitfalls to watch out for when using the tools.
Point & Figure Charting, also referred to as P&F Charting, is an easy yet powerful form of technical analysis by measuring supply and demand in a stock.
P&F charts have excellent predictive powers to calculate target areas for a stock's share price.
A Point & Figure chart filters out market "noise" as the chart is not adjusted for nominal share price changes.
Drawing trendlines on a stock chart will identify support and resistance areas for a stock's share price.
Trendlines not only identify support and resistance areas, but they sometimes also form into identifiable chart patterns.
Trendlines are a simple, yet powerful trading tool that even beginning investors can use with instant success.
Developing An Exit Strategy
Developing an exit strategy is one of the most important aspects of trading and investing, otherwise profits will disappear at a faster rate than it took to earn them. Technical analysis can help you develop exit strategies.
Professional investors and large financial institutions make comments like "you can't time the market" - I strongly disagree with that statement. These investors and institutions are in control of large volume buys and sells.
These large volume buys and sells can definitely be identified and traded upon. They try not to draw attention to their portfolio moves though since they tend to move the market with the large volume. They try to avoid drawing attention to their portfolio positioning by making those comments.
Learning how to read large volume moves using a combination of the technical analysis methods I've assembled can greatly increase your portfolio's returns.
Technical analysis not only helps you develop an exit strategy, it can also also help you calculate the best prices to pay for stocks when purchasing them.
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