Timing Your Stock Trades
I've been using technical analysis for years to make money in the stock market through stock trading and have found it to be a key to my success. Mo...
I’ve been using technical analysis for years to make money in the stock market through and have found it to be a key to my success. Most people just put money into the stock market without any plan on when they are going to buy a stock or sell a stock. But if you don’t know when you are going to take your profits then the market will take them from you.
You see you have to do more than just get an idea from TV or read about a hot stock in a magazine to make money. You have to know basic trading tactics and fundamentals and put them to use. That is where understanding price action and stock charts comes in.
Three principles guide the beliefs of technical analysis. First is that market action (price movements and changes in trading volume) discounts everything. In other words all of the relevant information about a company’s earnings and fundamentals are already known and incorporated into the price of its stock. Looking at a company’s balance sheet will rarely give you an edge over other investors. Everyone else knows that information too.
One other thing you need to know is that prices move in patterns. There are patterns you can find in a stock that will tell you where it is likely to go in the future so you don’t need to outsmart the whole world to make money. You just have to identify the patterns that are important and understand them.
The third principle of technical analysis is that patterns happen over and over again. Traders and investors tend to move in herds and do the same thing over again, because people don’t change. This enables the technician to profit from the behavior of the crowd in the market.
From these principles the technician attempts to identify trends in the market and reversals of trends. To distinguish trends from meaningless short-term fluctuations they use one of two types of analysis or a combination thereof: charting and mechanical trading systems. Chartists use graphs of stocks to identify meaningful patterns in the price and volume action of a stock.
The whole secret to investing is to get your emotions out of it as much as possible. Most people by because they fear missing out on more gains and sell when they let losses pile up and can’t take them anymore. You just need to make rules to let your winning positions run and cut your losing positions quickly so they won’t eat up your account balance.
It is all about learning and planning. You do those two things and you can make money in the stock market. Most investors don’t and that is why most investors don’t make a whole lot of money in the stock market or are just at average. You can do better if you just take action for yourself.
For more from Mike Swanson go to his free course.