Stock Trading 101
I'm sure you have your own method to picking out what stocks you like to buy. You might be a value investor who buys based on fundamentals. Or you may be a growth investor who looks for companies that have big earnings growth. Whatever type of stock you buy you need a method to know when to buy and sell.
That is where technical analysis can come in. Technical analysis cannot tell you if a stock is cheap or expensive based on fundamentals, but it can tell you when you should buy and sell, which is just as important. Technical analysis is all about using price action to time your entry and exit points.
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.
The second principle is that asset prices move in trends. Predictable trends are essential to the success of technical analysis, because they enable traders to profit by buying assets when the price is rising, or as the popular saying goes, "the trend is your friend." Borrowing from Newton's Law of motion, technical analysis asserts that trends in motion tend to remain in motion unless acted upon by another force.
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. - 23210
That is where technical analysis can come in. Technical analysis cannot tell you if a stock is cheap or expensive based on fundamentals, but it can tell you when you should buy and sell, which is just as important. Technical analysis is all about using price action to time your entry and exit points.
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.
The second principle is that asset prices move in trends. Predictable trends are essential to the success of technical analysis, because they enable traders to profit by buying assets when the price is rising, or as the popular saying goes, "the trend is your friend." Borrowing from Newton's Law of motion, technical analysis asserts that trends in motion tend to remain in motion unless acted upon by another force.
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. - 23210
posted by X - Men @ 12:32 AM
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