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Stock Trading Secrets
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Written by: Michael Swanson
Total views: 3 |
Word Count: 441 |
Date: Fri, 24 Jul 2009 |
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I've been using technical analysis for years to make money in the stock market 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.
For more from Mike Swanson go to his stock trading blog at WallStreetWindow.com.
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.
There are three key things you need to know when it comes to charts and technical analysis. First you must understand that the price of a stock is already factoring in the future. A stock is high because people think the future is good and low when they think it is bad. So if you want to make money based on that you are trying to outsmart the entire world.
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.
The important thing is to be able to tell when a price movement represents an important pattern or is just noise you need to ignore. To do that you just need to do some studying and learn the patterns. Most people don't do that and just chase fluctuations and lose money.
This requires a degree of skill, judgment, and interpretation. Mechanical trading systems attempt to do away with subjectivity by basing investment decisions on mathematical indicators calculated with the variables of price and volume.
Money doesn't fall from the sky. Making money in the stock market requires guts, grits, and tough work. You need to educate yourself on technical analysis in order to use stock charts and make money off of price action in the stock market.
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