Before you decide to buy a particular stock you must first know why you are buying it, have a goal, and have a target in mind. These are the basics in stock trading if your plan is to succeed. There are all sorts of styles of trading. There are your short term traders that include day traders, swing traders, and position traders, and short term investors. Then you have long term investors, that well they are in for the long term and are not concerned with making profits in a short time frame. This site was created to help short term traders (not day traders) and short term investors. Sorry, but we feel that day trading these markets is too risky, and we actually have developed our successful system using both swing trading and position trading.
Fundamental Verses Technical Analysis
People base their decition making to trade a particular stock either on technical analysis, fundamental analysis, or both. As experienced short term traders we we don't understand how in todays market one can buy a stock solely on fundamental analyis. In short technical analysis helps one to understand where the stock has been and the probability of where it will be going short term.
It is technical analysis that will keep you flying high! There are 2 main schools of thought in the stock market. You have technical analysis and fundamental analysis. Some people feel they are opposites, but for the professional and experienced trader they co-exist.
Technical analysis analyzes the historic price and volume action of a stock and accordingly predicts its future behaviour. Fundamental analysis is very different from technical analysis. Fundamental analysis starts with the financial statement of a company, and considers factors such as revenue growth, cash flow, earnings, dividends, and operating profits. Fundamental analysis considers economic and political factors to determine the value of a particular stock. The fundamentalist before purchasing a stock analyzes the fundamentals of a company.
A technical analyst analyzes charts like a science. He knows when a stock is in a downtrend, and when the stock has hit support and has begun an uptrend. By spotting stocks at the right time and purchasing them before their next big move and exiting on time, it is possible to make great short term profits in the market, and make a nice income from trading.
Another big difference between fundamental analysis and technical analysis is time horizon. Technical analysis can be used on a monthly, weekly, daily or even 1-minute time horizon, according to your style of trading. If your a swing trader you will be interested in monthly and weekly charts, and if your a day trader (which we don't recommend) you will be analyzing daily and 1 minute charts. A Fundamental analyst considers longer periods like months or years. in order to determine fundamental factors. You need a longer time period in order to examine the fundamentals of a company.
After many years of experience we have had trading the markets, we have come to the conclusion that technical analysts can trade without fundamentals, but fundamental analysts cannot survive the markets these days without technical analysis. However when applying both in your decision making you are better equipped with the information that is needed in order to profit from the stock market, simply because you will make better trading decisions. Remember that Only technical analysis can alert you when is the best time to enter or exit a trade.
In fact so many fund managers only know fundamental analysis, and then they don't understand why they have lost so much money. They do not understand when to enter and exit a position. When the warning signs are present, for example a stock has broken its support or has closed below its 50 day EMA (all technical indicators), the fund manager just sits there scratching his head trying to understand why his stock is not making him money!
When beginning to trade you can start doing your own technical analysis with stocks , please read our FREE ebook "Trading Secrets Revealed" that will teach you the best technical indicators you should use for your technical analysis. You can also subscribe to our service where we do all the technical analysis for you. We have tested hundreds of trading systems and strategies and we have created our own unique system and strategy that really works. We combine both fundamental and technical analysis in our system and that is why when we send you our stock picks, they are great picks! To find out more about our service which we are offering at a very low cost please go here.
Have a Trading Plan or strategy that works
However basic technical analysis is not suffice without having a trading plan or proven strategy that works. Here is a list all the important components of a solid trading plan. We explain in more detail how to create a trading plan in our FREE ebook "Trading Secrets Revealed".
1. Will you trade stocks or options, or both.
2. How much capital will you trade with.
3. How often will you trade.
4. Which style of trading will you apply. (Day trading, swing trading or position trading)
5. When will you enter a trade-which key technical indicators will you use to determine weather you should purchase a particular stock or option.
6. When will you exit a trade? Where will you place your stop loss, and what will your target be (a profit of $100 or wait a month longer for a $400 profit)?
7. What are your financial goals? (some extra money or a steady income).
For more information on stock and option trading. Get our FREE ebook that will reveal the secrets to successful trading!