Trading with Focus – Just buy low and then sell high
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Whether you’re a day-trader or some sort of long-term investment holding person (sure you are), it’s important to at least review, if not understand the charts when you’re in the stockmarket.
I’m not talking about going into reading tea-leaves and grassy-knoll-lizard-people-level tech analysis – but the ‘picture telling a thousand words’ kind of thing.
If you have decided to invest in a share of a company, you should always check the short term and long term trends over different time periods.
Buying a great company at a bad price can haunt your portfolio for years – and you’d hate for the human race to be judged just on the last 9 months, especially with all those rolls of toilet paper you’re still hoarding.
Here’s a few simple things to remember about technical analysis before you write it off, or dive headlong into the science. Many have entered, few have returned, sort of like your…<insert yo mama joke here>
It’s often said that the fundamentals of the company (what it does, how big it is, how much money it makes etc) should help you choose a stock, but it is the technical analysis that can help you pick the right entry. And exit.
You can form a view and understanding of both the fundamentals and technicals of a share. And Marketech Focus provides you with both sets of tools – at the click of a button. Then it’s up to you whether you use them. The trading platform equivalent of “Do what you want, just don’t say we didn’t offer”.
Technical trading doesn’t work all of the time, but it often does. And in trading, or investing, being right more often than not is what it’s all about.
But trading all listed companies the same way is like treating all forms of transport the same way – you don’t need a bus-pass in an Uber, and you probably can’t/shouldn’t try to kick-flip a horse. Always read the room.
There isn’t any one indicator or combo that is always right, but they all have a reason for being. Before considering a trade entry you should consider the longer-term trends and whether a certain indicator (or combination of indicators) has worked well in the past. There’s a better chance a lot of tech traders are following a stock that trades ‘technically’, and it’s better to run with the pack.
Don’t rely on one timeframe, check how it looks when the chart is adjusted over different time periods. And if you entered a trade on the technicals you should probably exit in the same way. (Like that time you went to a BBQ with the missus and there were Avon brochures on the counter. Get out, it’s not a real BBQ.)
Marketech’s charts make it easy to slip between multiple time periods from one minute to one month with live pricing, all within the palm of your hand.
And set your alerts to remind you mid-meeting that you’re a terrible trader (they’ll think its Terry from accounting with those important figures you’ve been waiting for).
Simply enter your password, two-clicks to ‘sell-all at-market’, then back to your meeting. Wait, you’re still using a website on your phone? What is this, 2009?
The interesting thing about technical trading is that the more people that use it to make their trading decisions, the more likely the stock is to follow those patterns. Or, a different spin – if you’re looking for crazy, go to where the crazy is at.
Obviously, the higher volume and volatile stocks will have more traders – and therefore, more technical traders. You may even notice technical points of inflection reflected in the depth, with larger numbers of buyers and sellers lined up at that price point. Have you got live expandable depth that shows where your order is in the queue? On an app too? We have. Just sayin…
Don’t worry, no-one gets it right all of the time. (The last few months have been spectacular though; am I right?! Woop woop! I’m a super-trader and this time it’s different!) Also: do worry, because no-one gets it right all the time. And that includes you. (‘Not me though’, he said for the millionth time, not from his private island).
Rallies end. So do trends. As soon as any trading strategy works too well, the masses move in and take advantage, closing your loophole. Or, put another way: as soon as the Facebook guys start showing their amateurishness, the pros will eat them alive. Recently there was an article about how the Facebook/Robinhood guys were all coming in a few minutes after the market opened, so the pros were giving it a nice little tap on the open and then filling them in as they chased it. (Somehow, unbelievably, the article seemed to put a negative spin on it! Would professional sportsmen take it easy on the amateurs because they all played in the same league?)
There’s a lot of information on the ins-and-outs of the use-cases for different trading indicators, and a lot of technical trading systems for sale – and some of them are fabbo. But as with any investment opinion or advice, if it was perfect they wouldn’t need to be selling you a ‘system’. Would you sell the golden goose? The real trick is staying informed, learning from your mistakes and keeping emotion out of your trading decisions.
Anyone can replace the tiles in a bathroom with a bit of knowledge and the right tools. And although you might not get it right the first few times you can always pull them down and try again, as long as the concrete doesn’t set first. Or suck it up and pay someone to do it for you before your mother-in-law sees it (aka managed funds).
Marketech Focus provides data and tools to help you maintain your trading edge, but you’ll have to decide how you trade – which probably involves you learning stuff that might, on first glance, sound like a load of rubbish.
You don’t have to believe in technical analysis, you just need to know that there are a lot of technical traders in the stockmarket right now that are trying to take your money.
So you should at least understand their tricks and watch them at play. Because maybe, just maybe, like Lacrosse players, they are enjoying themselves more than you are.
Trade Up to Marketech Focus — a high-function trading platform from $45 per month. Instant trading capability for both PC and mobile to keep you on the move.
As a subscriber you will have access to brokerage starting at $5, and then 0.02 per cent for trades over $25k. Go to www.marketech.com.au to set up a free trial.
This article was developed in collaboration with Marketech Stockbroking Pty Ltd (AFSL 486148), a Stockhead advertiser at the time of publishing. This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.