With the growing market of internet based brokers and the substantial volume of people trading from home, I am kind of disappointed at the continuing lack of knowledge surrounding technical analysis. Obviously there is a technical analysis circle on the web, yet it is nothing in comparison to the rest of the trading community. Relatively few people embark on their trading career with a technical analysis mindset. People normally start off by using fundamental analysis and learn about technical analysis either later on... or otherwise not at all.
Probably the most likely reason for this is our exposure to mainstream newspaper and tv. Any time you read a finance website, the headlines tend to be about growth rates, mergers and acquisitions, or maybe if we're lucky enough- the latest lawsuit.
I suppose "CEO ponzi lawsuit" will usually draw stronger blog traffic than "bearish engulfing pattern".
So this is the reason why the fresh new trader is already predisposed to a distinct form of trading. They flip on the news, see a press release, and maybe read some overrated forum posts. This is a unsafe way to start, but for the fresh trader, this is all too common. On top of this, new traders will typically move towards small cap stocks. The elevated financial risk is squashed by the idea of owning a larger amount of stock and having a better chance to strike it rich.
Sure, I know- the true fundamental folks are taking part in a lot more than just watching the news and rolling the dice. But, the typical trader isn't. The fresh trader is trading on 'hot tips', blog posts, and generally speaking other forms of hearsay. The dilemma is undeniable- average Joe is the last guy in the queue to hear the headline! By the time anything of importance makes its way to the public, it has already been passed to friends, colleagues, and ultimately just about anybody who is someone on wall street. I love taking a look at a stock chart soon after bad news is publicized. What? The stock started to tank a few days ago? Gee what a coincidence.
And for those of you reading who believe the SEC can actually protect against insider trading:
The next time you happen to be on a lovely sandy beach and want to go for a swim, please be careful not to swim too far away as you may slip off the edge of the earth.
The prospect of freedom is really what should make technical analysis so popular with the average trader. You aren't at the mercy of yesterday's stale news. Your crucial tools are your charts, and the charts won't tell lies. Moving averages, candlesticks, and chart patterns are precise and you do not need to think about an unforeseen danger showing up at any minute. When you learn a TA concept, it will not go away and it can be employed as you want, each and every day.
I encourage every new trader to give technical analysis a swing, even if it just means carrying out a a handful of paper trades. Switching away from the press releases and depending upon your own competency is a rather cool experience. I will always remember my very first technical trade. I discovered a breakout stock with a decent pullback as well as a compact flag pennant. I chucked a bit of dough at it and defined a tight stop loss. And after 3 trading days, I had brought in 40% and recognized my sign to sell. I brought in 800 dollars on a stock that I identified with my own eye balls, my own personal reasoning, and all from the convenience of my very own home.
So now doesn't THAT sound like a better way to trade?
Probably the most likely reason for this is our exposure to mainstream newspaper and tv. Any time you read a finance website, the headlines tend to be about growth rates, mergers and acquisitions, or maybe if we're lucky enough- the latest lawsuit.
I suppose "CEO ponzi lawsuit" will usually draw stronger blog traffic than "bearish engulfing pattern".
So this is the reason why the fresh new trader is already predisposed to a distinct form of trading. They flip on the news, see a press release, and maybe read some overrated forum posts. This is a unsafe way to start, but for the fresh trader, this is all too common. On top of this, new traders will typically move towards small cap stocks. The elevated financial risk is squashed by the idea of owning a larger amount of stock and having a better chance to strike it rich.
Sure, I know- the true fundamental folks are taking part in a lot more than just watching the news and rolling the dice. But, the typical trader isn't. The fresh trader is trading on 'hot tips', blog posts, and generally speaking other forms of hearsay. The dilemma is undeniable- average Joe is the last guy in the queue to hear the headline! By the time anything of importance makes its way to the public, it has already been passed to friends, colleagues, and ultimately just about anybody who is someone on wall street. I love taking a look at a stock chart soon after bad news is publicized. What? The stock started to tank a few days ago? Gee what a coincidence.
And for those of you reading who believe the SEC can actually protect against insider trading:
The next time you happen to be on a lovely sandy beach and want to go for a swim, please be careful not to swim too far away as you may slip off the edge of the earth.
The prospect of freedom is really what should make technical analysis so popular with the average trader. You aren't at the mercy of yesterday's stale news. Your crucial tools are your charts, and the charts won't tell lies. Moving averages, candlesticks, and chart patterns are precise and you do not need to think about an unforeseen danger showing up at any minute. When you learn a TA concept, it will not go away and it can be employed as you want, each and every day.
I encourage every new trader to give technical analysis a swing, even if it just means carrying out a a handful of paper trades. Switching away from the press releases and depending upon your own competency is a rather cool experience. I will always remember my very first technical trade. I discovered a breakout stock with a decent pullback as well as a compact flag pennant. I chucked a bit of dough at it and defined a tight stop loss. And after 3 trading days, I had brought in 40% and recognized my sign to sell. I brought in 800 dollars on a stock that I identified with my own eye balls, my own personal reasoning, and all from the convenience of my very own home.
So now doesn't THAT sound like a better way to trade?
About the Author:
To understand the difference between an unsuccessful new trader and a successful new trader, take a look at Will Thorton's totally free Technical Analysis Class. You shouldn't trade stocks before educating yourself. Play it safe and learn Technical Analysis right now.