Stock Market for Dummies

Understanding Technical Analysis of stocks, futures and commodities could be a beneficial tool in determining the trend of any marketplace and assisting with entry and exit levels for your trades.

The objective of technical analysis within the stock, futures or commodities marketplace would be to support us figure out when a marketplace is trending, and when it’s not. If a stock or futures contract we need to trade is trending, then we desire to be on board. If it is not, all you might be going to do is shed dollars as you get whipsawed about day right after day. This is just not what we want as traders

In case you trade employing a weekly chart, all it takes is really a couple of trends a year to create plenty of income trading. In case you trade some thing like that S&P Emini futures contract, employing a 3 minute chart, then you’ll need one or two of these strong trends a day to do well, but it is all relative.

Unfortunately, many people fight the trend and buy at every small up tick in a down-trending marketplace, thinking they have picked the bottom, only to see the Stock or index fall further immediately. By the time the sellers are finished, these traders have spent their monetary and psychological capital in a futile attempt to pick the bottom of the marketplace.

Another common mistake traders often make is buying more as the price falls, or averaging a loss. You can imagine how dangerous this strategy may be in a strongly down-trending stock – it is some thing good traders never do. The trend is your friend, don’t ever buck it.

Good technical analysis skills, especially in fast moving futures and commodities markets, give us a mechanical indicator for price points to use for entries and exits and take many the guess work out of our trading. It really is very hard to argue that the trend is anything but down at any time in the event you are simply looking at a series of consistent lower tops and bottoms on your chart.

Does good technical analysis mean you’ll always make dollars?

No, of course not. Losses on some trades are inevitable, as we cannot know for sure what the marketplace will do. It only takes one person somewhere within the world to invalidate your perfect trade set-up and send the price of any marketplace inside the opposite direction to what you were certain was going to happen.

All our analysis can do is alert us to probabilities – there are no certainties in financial markets. This is the hardest thing for most traders to accept. We all hate to be ‘wrong’, but that is the nature of the trading business.

All we can do is take every trade and see what happens. The better our analysis and our trading system, the more likely our trades will produce profits.

Every one of us must learn or develop a system of analysis that we are comfortable with, based on what we learn from other traders, mentors and coaches, and then we must take every trade that system signals.

If we start to second guess our system, we may as well throw it away and just stick with our day job.

Make a decision to develop or learn a technical analysis system you’re happy with, and commit to taking 20 trade set-ups in your preferred stock, futures marketplace or commodity no matter what.

Then follow your trading rules to the letter. This will give you an objective measure of how profitable your system is and whether it can be right for you.

In case you can enter a trade and hold a position, your plan is sound. If not, you may be over-trading (have too many open positions for your account balance and your personal temperament) and need to reduce the size of your position or adjust your plan is some other way.

The large profits come from making use of a proven technical analysis method to identify a strongly trending marketplace and taking multiple positions with that trend.

This naturally involves holding firm and not jumping out at the first sign of trouble. Of course, you can only take what the marketplace is prepared to give, so a system of trailing stops is actually a good way to lock in profits as they accrue.

Bottom Line: Find a trading and analysis system that’s been proven to work from somebody who has been actually trading it for a long period of time, have that person coach you through their system until you can implement it flawlessly, then take every trade signal the system produces regardless so you can test it is validity.

All great athletes, business people (and yes traders) have a mentor or role model who they turn to for advice and guidance. Find one for yourself and your results as a stock, futures or commodity trader are bound to improve.

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