A Primer on Technical Analysis November 15, 2010
Posted by wallstreetbuddha in Trader Education.Tags: Breakout, Channels, Definition of Technical Analysis, Learn Technical Analysis, Support and Resistance, Trendlines, Wedges
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Technical Analysis - def. A popular method to determine a stock or commodity’s value by observing and analyzing charts with historical price pattern. When using this method, we are not attempting to value a security intrinsically. We use charts and various tools that identify patterns that determine entry points of minimal risk. Technical analysis does not “predict” or assume future value of a security.
Trendlines: This is an UpTrend. It connects higher lows and defines a trend. To trade this, one would buy at points that touch the trendline and sell if the price action gets below.
Channels: The highs are connected and the lows are connected forming a channel. When the price action bounces off the bottom line we can say that is a support level. When the price bounces off the top line we can say that is a resistance level. We buy on support and we sell on resistance.
Wedge: A Wedge is like a triangle. In this case we can see price action bouncing in between the yellow lines. Often times day traders will play the action on the inside of the wedge. Doing so should only be done if you have experience and have a large enough bank account.
What we play is the Breakout, when price action goes above or below from OUTSIDE of of the Wedge. In the example below we call this a breakout. If the price action started trading below outside of the wedge this would be called a Breakdown.
The 2 Best Books on Technical Analysis
Technical Analysis of the Financial Markets by John J. Murphy
Rules every Trader Should Know. November 15, 2010
Posted by wallstreetbuddha in Trader Education.Tags: Golden rules of investing, How to invest, Learn To Trade, Rules of Day Trading, Rules of Investing, Top 20 Rules of Investing
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Wall Street Buddha Rules to Trading
-Never “average down” , or add to a losing position.
-Sell Sell Sell positions that show losses while they are small
-Know your risk. Ask yourself, how much am I willing to lose on this trade.
-Learn to read the tape.
-Learn to add to WINNING position. This is the hardest to do.
-Know whether its a bull market or bear.
-Never over diversify
-Never buy cheap stocks. Penny Stocks or OTC stocks. Only buy quality
-Only buy the healthiest companies. Invest in GROWTH
-Don’t have a mindset of making easy money. Real money= hard work.
-Don’t trade on rumors, tips, news, announcements, or “experts”
-Do your own homework. Get rid of those newsletters.
-Study Charts. Technical Analysis.
-Never place all your money on one trade. Risk Management.
-Plan your trade. When you’ll get in, and when you get out. Dicipline is the key.
-Sell losing positions
-Study sectors of the Market
-Focus on Leading Sectors of the Market.
-Focus on stocks that are Leading in those sectors.
-Limit the number of stocks you trade to 10
How to Spot The Birth of a New Bull Market. May 3, 2010
Posted by wallstreetbuddha in Analysis, Trader Education.Tags: Bull Market, Bullish Indication, Market Bottom, Nasdaq, When to Start Buying Stocks Again
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This indicator only goes off every 5-8 years. But it has been reliable. When the 50 day EMA crosses above the 200 day EMA. This simple crossover signaled the beginning of last two previous Bull markets.
Market Perspective/What to watch/Possible major moves April 18, 2010
Posted by wallstreetbuddha in Analysis, Markets, Trader Education.Tags: BAC, How to Pick Stocks, Profit from Banking Collapse, Trader Education
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Friday morning the SEC commanded Goldman to bend over and assume the position. Emotions ran out of control sending the indexes to correct 1%. Huge volume, volatility spiked on the VIX. It is times like this that I look at the market in general to determine where it may be headed. Today I checked out one of my favorite sites, www.barchart. com. Specifically I look at the “Price Volume List” showing where all the action in the market was. I’ll grab this list to watch, analyze, draw trendlines, and anticipate future breakouts. Just by sorting the list in order from gainers to losers, it is obvious that the selloff in the indexed is highly concentrated in the financial sector. Names like Goldman, Citi, JPMorganChase, Bank of America are the losers. The whole suit against Goldman brings into question of the health of the economy and the banking sector in general. Maybe the recovery isnt over. I’m looking for a possible catastrophic collapse of the financial sector once again. Who knows. You can only speculate. So just incase, I’ll keep an eye on the banks. Critical Support and Resistance levels are drawn on the chart below.
I could have charted the other banks, but because sectors are correlated, the charts are essentially the same. You only need to chart one of the stocks, BAC is charted below. When alerts get hit just look for confirmation later in the other banks’ charts later.
You can see that BAC has been flat between the yellow trendlines. When the stock trades outside of the yellow range I will initiate a position in that direction.
Good luck.
