It’s always interesting listening to fundamental and technical analysts argue.
Just as fundamental investors like to laugh at technical analysis, technicians laugh at the absurdity of investing just on fundamentals. It’s a never-ending, laughable fight.
Fundamental analysis shows us what’s under the hood, and whether or not an asset is over- or underpriced, as compared to the competition. In fact, Warren Buffett, Baron Rothschild and Sir John Templeton subscribed to this school of thought and made a fortune. They seeks to uncover the intrinsic or true value of an asset, and is dependent on future sales, earnings, and estimates. It’s pain-staking research at times.Read More
No one ever said technical analysis was easy.
But over time, with practice, the easier it becomes.
For months, we’ve introduced you to several technical tools. However, the one we get the most questions about are Fibonacci retracements. To many, this took is considered complex and outdated. But to be very honest, it’s not complex at all once you practice with it.
When it comes to trading, one of the best ways to tell how strong or weak a stock may be is by paying attention to the Money Flow Index (MFI).
In its simplest terms, money flow is another momentum indicator that indicates strength of money flowing in and out of a stock. If the flow of money into the stock is weak, we’ll begin to see MFI trend down. But as money flows into a stock, we can see this happening when MFI trends up.
It’s also essential in determining overbought and oversold conditions.Read More
When it comes to technical analysis, one of the necessities for success is the moving average. In fact, for years, I’ve personally relied on two of them – the 50-day and even the 200-day moving averages.
Each is powerful because they give us a view of a stock’s trend, as well as a look at where we may find support and resistance along the way. For example, if I find a stock that historically bounces every time it hits its 50-day moving average, I’m likely to buy on a test of that moving average.
That’s because, as they say, the trend is your friend.Read More
echnical analysis has always been rejected as a study of lines and charts without any real concrete or profitable results. And clearly, an exhaustive debate on its usefulness would be long-winded, especially against those that only subscribe to fundamental analysis, as Warren Buffett does.
But as any technician will tell you, it does work well with understanding.Read More
We’re often told that technical analysis is a waste of time.
Traders are often told to ignore it altogether.
“Technical analysis is fundamentally flawed,” says Forbes.
“Technical analysis is stupid,” blared The Motley Fool.
But it’s just not true. In fact, technical analysis is just as important as fundamental analysis.Read More
No one was ever born a successful trader, but we all have the potential to become one.
The other week, we discussed the key reason why so many traders fail because they get caught up in doing what every one else is doing.
However, even if you’re successful at doing just that, there are other key elements of a trade, including planning out the trade and executing it properly. Unfortunately, all too often, we trade without a plan, without a safety net. And that’s the best way to lose money. Here are top five questions you should always ask yourself prior to a trade.
By now, you’re well aware of how to find trends using simple moving averages, such as the 50- and 200-day moving averages. But you should also know how to potentially spot when a trend could stop dead in its tracks, or birth a new trend.
All we have to do is wait for a crossover to do so.
For example, we can spot a bullish “golden cross” when the short-term moving average, such as the 50-day crosses above the longer-term average, such as the 200-day. When this happens, we’ll typically see a move higher in a stock or an index.Read More
Most of us are familiar with what happens when you pull a rubber band too far.
It has a tendency to snap back. That same idea applies to stocks, too. For example, if a stock sells off too much too fast, it has a tendency to snap back, or revert to mean.
Or, if a stock runs too high, too fast, it’ll often snap back as well.Read More
The trend is the most important concept in technical analysis.
Its strength or weakness can dictate the overall direction of your favorite stock or index. Potential uptrends can be characterized by a series of higher highs. Potential downtrends can be characterized by lower lows.
Look at the NASDAQ Biotech ETF (IBB), for example between 2013 and mid-2015.Read More
It’s not difficult to understand why candlesticks have become so popular.
Unlike your typical bar or line chart, candlestick charts tell us four essential things in a given day – the open, high, low and close. More importantly, they can tell us how strong or weak the bulls or bears are at a point in time.
For example, if I spot a doji cross at top of trend, it’s an indication of indecision among the bulls and bears. It can also tell technicians – based on historical observations – if a trend is likely to reverse in the opposite direction.Read More
Keep it Simple, Stupid!
Coined by the U.S. Navy in 1960, “Keep it Simple, Stupid” is the idea that most systems work best if they are kept simple rather than complicated.
Therefore, simplicity is key.
That’s especially true if you truly want to make the most money.Read More