LEARNING TO TRADE WITH TECHNICAL ANALYSIS
There are two basic methods of trading: Fundamental Analysis and Technical Analysis.
Almost every fundamental analyst also uses some technical analysis.
I donít know any fundamental approach that over time makes money. There are too many unknowns to be factored into the buy or sell. Selling is always a problem for fundamentalists.
One of the major draw backs of fundamentals is they are lagging
indicators on both the buy and sell side. Look at the last 10 years of mutual fund performance and less than 5% of fund managers have made money for their clients.
Using mutual funds as a vehicle of trading a good technical analyst will always out perform the fund and the market.
Do you, should you, learn technical analysis? My basic answer is Ďyesí.
No intelligent investor should buy any mutual fund or stock and forget it.
Markets go up and, unfortunately, markets go down. The best equity in the world will be influenced by the direction of the overall market. Here is where technicals are important.
Markets and stocks always look best from a fundamental position when they are at the top. This is when the little guy gets sucked into buying. The smart money is selling. What do they know that the small investor does not?
On the Internet there are hundreds of software programs that will teach the investor ALL about technical analysis and trading. That is the pitfall. You donít need to know it all, just a few methods that work about 80% of the time.
As a professional technical analyst let me show you what you need to know.
First thing. You DONíT need to know everything. When I was an exchange member and floor trader I did not trade every day. Many times I would be out of the market for long periods of time. WAITING.
Off the top of my head I know at least 200 technical trading methods, but I have narrowed them down to two basic signals and about 4 or 5 others that conform the first two.
What I am trying to have the investor understand is he only needs to know a very few technical signals and then wait for them to appear. Markets are dynamic and move all the time. Find a very minimum of signals that you like and understand.
Stick with those and you will make money. Most important you will not lose money.
The Bible of technical trading is the book Technical Analysis of Stock Trends by Edwards and Magee. It will be intimidating at first. It is doubtful your broker will even know of it as brokerage companies discourage technical analysis. No, I donít know why.
Technical methods will help protect assets when the next market decline occurs. I guarantee there will be one.
The time to start your education is now.
Al Thomasí new book, ďIf It Doesnít Go Up, Donít Buy It!Ē, 3rd edition, has helped thousands of people make money and keep their profits with his simple 2-step method.
The method made 10% during 2008. Read the first chapter at http://www.mutualfundmagic.com and discover why heís the man that Wall Street does not want you to know.
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