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Technical Analysis

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JScott

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I just read Rich Dad, and now I want to make lots of money...what should I do next?

Just kidding... :smilielol:

Seriously though...I'm almost through my first book on technical trading (I've done plenty of trading based on fundamental analysis, so I understand equity trading in general), and I wanted to get some very basic thoughts and advice from any of you that are more experienced with technical trading.

I'm open to any thoughts or advice, but here are some questions to get you started:

- What are the best books (in your opinion) on the subject? For what it's worth, I have math and engineering degrees, so math and statistics don't scare me

- What software would you recommend to do chart analysis? I imagine there is a huge spectrum of software packages out there, so more specifically, what would you recommend to someone who is new to this, but serious about learning

- Are there specific types of equities, indexes, or markets that are more suitable for a beginning technical trader? For example, would you recommend I focus on high-volume "popular" stocks, low-volume stocks, options, etc? Or is it all pretty much the same?

- I know the answer is most definitely, "It depends," but can anyone comment on any "rules of thumb" for how much a good technical trader might expect to make in ROI? I've heard numbers like 1-2% of total trade volume per day; is that a common figure thrown around?

- Just out of curiosity, do folks on this forum focus on day-trading or longer-term trading? Swing trading or trend trading? Any other common specialties, and if so, what are the advantages?

- I'll be starting with a bankroll of about $10K (until I gain some confidence or decide that technical trading isn't for me). Based on that amount, would you have any recommendations about the types of equities I should start trading? Should I start with lower priced stocks at higher volumes? Higher priced at lower volumes? Or perhaps even low price and low volume until I'm comfortable?

Any other recommendations or tips that might give a first-timer a fighting chance of beating the market?

I realize these are some very general and basic questions, but appreciate any help I can get!
 

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RAiMA

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Aug 24, 2007
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:smash:
- Just out of curiosity, do folks on this forum focus on day-trading or longer-term trading? Swing trading or trend trading? Any other common specialties, and if so, what are the advantages?
I can't speak for the others, for myself my trading is based on longer term. I'll only be doing 1 or 2 trades a month. Initally I may put about 2-4 hours a month in for analysis, but it will come down once I filter out the stocks to avoid. Already got the spreadsheets setup.

The idea is to put a small amount of time, for good gains to free me up to do other things. Don't want to be tied down to another job.
 

MJ DeMarco

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I swing trade, but that's only when I have time. I haven't been in the market much due to my expectation of a pull back, and boy, its pulled back.

I'm 80% a technician and 20% a fundamentalist. Chris Peruna (piranha256) on this board is a trader and does well ... his blog is listed in his signature.

I'm a fan of William Oneill and all his books. However being out of the game for so long will exclude me from commenting much further. When I can't trade the market, I move to cash or mutual funds.
 

MrDoctor

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Aug 13, 2007
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I swing trade, but that's only when I have time. I haven't been in the market much due to my expectation of a pull back, and boy, its pulled back.

I'm 80% a technician and 20% a fundamentalist. Chris Peruna (piranha256) on this board is a trader and does well ... his blog is listed in his signature.

I'm a fan of William Oneill and all his books. However being out of the game for so long will exclude me from commenting much further. When I can't trade the market, I move to cash or mutual funds.
I picked up William J O'Neil's "How to make money in stocks" after MJ had recommended it. I believe it is a great technical book that anyone can undersand. But, let it be said, technicals and fundamentals don't matter in today's market/day in age. They still do to a certain extent. You don't want to put your money in a negative EPS. Every good stock has a high EPS, but even negative EPS ratings can make you money. I still say EBAY is an overlooked comany :smx7:.
 

NerdSmasher

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Aug 31, 2007
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I tend to try to make the fast money in my trading strategies.

Generally, there are a few ways to do this:
1. Penny Stocks
2. Certain Specifics in T/A
3. Follow Good News (Like Apple's new iPod hype)
4. Stock Options (Most confusing, and most profitable, in my opinion)

With Penny stocks, well, pretty much all you're doing is finding a stock that isn't losing money, and hopefully is growing. Then, to make money quickly, you watch it until news comes out, then, ideally buy around the bottom and sell as it gets higher. Or, you could buy it now, and wait until it explodes (which can take years, in some cases... if ever). Other than that, you can always try to find one that went up a lot the previous trading day, and see why, then decide if you think it will continue to go up. If you think it will, then buy it and enjoy the gains on that. Many penny stocks go up for a week or more before they finally hit the top, and it is almost always 20%+ per day :)

If you understand T/A well enough, then it is usually pretty easy to find a stock that you can expect to go up for the next couple of days, at least. And, with this, I'd imagine one could get somewhere around 3%-5% a week. And, no, that's not a completely off the wall number, I've done it. I won't get into the specifics of how to do this, as I'm really no expert on it, but the way I go about it is using the MACD indicator, and usually watching the RSI as well, to know if it's a good time to buy. This is a difficult market though, very volatile, so it is a bit more of a challenge.

There really isn't anything to be said about following good news. Just do it, and hope you're in before all the other people who are doing this (which is just about everyone). Some other people may be able to offer deeper insight on how to find it sooner than others, because I honestly have no idea. I just like playing with numbers :)

And, lastly, options. The only reason I say they're the most profitable, is because they are, in my mind, penny stocks that are connected to large companies. If you actually want to execute the option, then I don't think you're doing it right... or, at least not as profitably as you could. Honestly, I probably could explain options trading, and if you guys would like me to, I will. But, it would be a very long post, so I'm not going to do that right now. And, I imagine there are others on this board who have more experience with options. I know how they work, what they are, and theories behind them, but I've never actually traded them, because my Scottrade account isn't an options account (yet).

I hope this helps!
-Nerd
 

CarrieW

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the best t/a program ive come accross is e-signal. it works for forex or stocks. it costs about 150bucks a month... if i could afford that id so be using it... maybe 1 day.

most of the time the platform you trade on/in has enough t/a to get you thru.
 

piranha526

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Aug 20, 2007
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I'm 80% a technician and 20% a fundamentalist. Chris Peruna (piranha256) on this board is a trader and does well ... his blog is listed in his signature.
I am not sure if I am breaking the rules here (so let me know MJ) but the best I can tell you is to read my blog. I have several hundred articles and case studies that I just couldn't repeat here.

I will say this: $10,000 will get you nowhere with day trading,
Maybe a slight chance swing trading,
Much better chance trend trading for longer periods of time.

Great Technical Analysis Books:
How To Make Money In Stocks by William J. O'Neil
Stan Weinstein's Secrets For Profiting in Bull and Bear Markets by Stan Weinstein

Must Read Overall:
The Battle for Investment Survival by Gerald M. Loeb
Martin Zweig Winning on Wall Street by Martin Zweig
Trader Vic - Methods of a Wall Street Master by Victor Sperandeo

I have more advanced system development books once you read these and start trading for real!
 

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