Internet Stock Trading and Stock Market Trading Tips that make a Difference
Do you want to Start Internet Stock Trading or Online Stock Investing?
Technical analysis is one of the most popular methodologies of trading one of which is trading Stock Market Futures. There are several ways to practice technical analysis so that you make the best stock purchase, but no amount of technical analysis can guarantee future price trends or where the market will go. Traders who use these methods will have better online stock investing but will to have a 100% win rate and most successful traders only have a 51-55% winning trade rate, it’s their consistency that helps their internet stock trading and technical analysis allows them to have that consistency.
Now with computerization developing to the higher levels we are seeing trades executed at high rates of speed, there are some technical analysts who are forgetting about fundamental principles of analysis. The bulk of retail and some professional traders and investors are relying on the prevalence of technical indicators in attempt to get an edge or to develop a trading system. Personally I like these traders who strategize to make themselves rich "overnight" as these traders are the ones who give intelligent traders like you and I our money. With hundreds of technical indicators many traders over-test and fail to learn how to trade. It’s difficult to call the analysis of a process of selecting technical indicators and attempting different indicators settings with the purpose of finding a combination that is profitable.
From the sounds of the above you may think and I am not a technical kind of guy but that’s quite the opposite, I promote a fluid discipline that is not so rigid that all the stars need to align prior to putting on a trade.
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What is Technical Analysis?
Technical Analysis is a study of supply and demand that can be used on the stock market as whole or single stocks. By evaluating the history of stock price fluctuations and volume as it relates to the amount of shares traded. Comprehending the way the price changes in relation to the Open, High, Low and Closing Prices on a given time period like minute, hour, day, week or month and comparing that to the volume can give an approaching market direction. This data required is typically shown in a Stock Charts so it is easily interpreted.
Technical Terms for stock trading and what they mean:
Trend Following - understanding what directional, seasonal and market trends are
Stock Charts – price by plotting price in charts to recognize the history of the stock, share or market index using Candlesticks Bars, or lines.
Trend Interpretation – Identifying support and resistance areas and drawing trend lines
Price Indicators - Oscillators know as Stochastics, Relative Strength Index (RSI), Moving Averages (MA), Moving Average Convergence Divergence (MACD), Supply & Demand - Stock Price Movement vs. Volume and Rate of Change (ROC)
Study of Price Volume Indicators - On Balance Volume (OBV), Time Segmented Volume (TSV),
Market Sentiment – Interpreting the confidence and fear of traders and investors
What are the Advantages that Technical Analysis has on Stock Trading?
If used correctly they can help you understand one side of the stock market equation. This is the "effect" part of the cause and effect equation. Technical analysis will show you what has just happened what the effect will be as in the market action in real time as displayed by the Price and trends
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What are the Downfalls that Technical Analysis has on Stock Trading?
Most stock market traders rely exclusively on technical analysis, this can be misleading. I support and encourage technical analysis and indicators and use them myself, however having only one instrument to rely on doesn’t leave you with a lot of options. Relying solely on technical analysis can cause problems for the trader or investor. These main issues are:
No understanding of economics – not being able to understand the basic economic facts of life can make an investor to take trades in a business or economic environment that is fundamentally bad, reducing any likelihood of success.
No grasp of company fundamentals - trading a stock that is on the edge of financial suicide reduces the odds of success of you are buying long. Of course if you are shorting a stock you also need to be able to understand the financial situation of a company.
Many stock market technicians don’t cover critically important areas like current economic health, company fundamentals, risk management, portfolio management and psychology
Technical Analysis is only one part of your Online Stock Investing
Now you know what to look for when deciding to educate yourself on trading and making sure your skill set is well versed. Make sure you have technical and fundamental analysis in your repertoire, combined with a basic understanding of economics and a most importantly money management, risk management and psychology.
Overall, there could be one advice only. Before going into a search of technical indicators, it would be correct to refer to the fundamentals of technical analysis. I particular, basic knowledge of Moving averages, stochastics and RSI to help me identify trends and this could provide a beginner trader with their knowledge of the stock market as well as some understanding their own trader's psychology.