Technical Analysis

Using Technical Analysis

Many times when people first embark on trading stocks, the first thing they do is try to uncover the next Google or Microsoft stock in its startup phase. While this is one way to go about investing, the chances that you will find this once in a lifetime stock are slim to none. A different approach would be to buy the stocks that are going up currently and sell them when they cease to continue higher. Sounds easy right? It can be done, but it is by no means easy. Technical Analysis is where learning to trade in this style comes in.

Most folks are looking for a buy-&-hold investment. Being busy with work and family, they can't be bothered with watching their stock on a tick by tick basis. This is great but in reality, stocks do not just go up all the time. They often go down! Using Technical Analysis will help you in learning to spot when stocks are gearing up to move higher and when they are getting ready to break down. Is it a perfect way to find entry and exit points? Not by a long shot, but you can 100 percent improve your returns compared to using no technical analysis at all.

At Big Moving Stock we focus on technical trading with a relatively short time horizon. If a trade isn't going as planned whether it is on the long side or short side, we can exit that trade rather than holding and hoping things get better. Swing trading is our specialty where positions are held anywhere from two weeks to two months. You can find stocks ready to make big moves and then capitalize on them in this time frame. That's the beauty of being short-term. We only have to be correct for a limited time, sell our position, and then move on to the next opportunity.

Supply and Demand are what drive the stock market and what dictate stock prices. Technical analysis is the study of price action and volume, not fundamental characteristics of a company. Fundamentals may eventually provide a payday but we'd rather focus on what will pay us today. We're not looking to wait for years to get a decent return on investment. Once you learn how to read Chart Patterns you will notice where support, resistance, and volume can tell you whether your stock is worth holding or if it is time to sell. Technical Analysis aims to take the emotion out of the trade and focus on the price action which doesn't lie.

Technical analysis of chart patterns is the way to find the best risk / reward entry and exit points. Stock Trading is mostly about managing your money by managing your risk. When you spot a Stock Chart Pattern that gives clear indication of a potential minus 5 points / plus 25 points on the risk / reward scale, you are substantially increasing your odds of a successful trade. This aspect of Technical Analysis will help you to trade with great confidence and with great confidence comes great returns.

Fundamental analysis can work for the big dogs, i.e., the multi billion dollar fund of funds that have access to information you simply do not. Yes the internet is great and Google is your friend, but no matter, you will not be privy to the knowledge the big players have. What you will have access to though is when they decide to take action. Stocks exploding out of a base on ten time's normal volume are not your Aunt Suzy buying up shares of that issue. Stocks exploding higher on large volume are institutional investors buying up as many shares of stock as they can, and this is yet another aspect of Technical Analysis that you can take advantage of.

Yet another advantage of trading in short to mid term time horizons using technical analysis is the ability to compound your investment returns much more quickly than if you are sitting around waiting for your stock selection to somehow magically become the next Microsoft. With Technical Analysis you can make 25 percent in two weeks to a month, take your profits, and then roll them into the next stock that is showing signs that it is ready to make a large move.

The main objective of the game is to make profits while your money is at risk and if your money is invested in a company seeking gains, then that money is at risk. Your stock selection may be a great company but the sad truth is, the stock of good companies don't always go up! Whether or not if it is a good company, if there is no demand for its stock or if everyone already owns it, the stock will not be going higher. That's not a situation you want to be in, you want to have your capital available to be put to work in the stocks that are moving or getting ready to move.

Join us at Big Moving Stock where we focus on using Technical Analysis for great stock returns every trading day!

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