Is Technical Analysis Better than Fundamental Analysis?

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Published: 12th February 2013
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With the growing market of web-based brokers and the large amount of people trading stocks from home, I am quite disappointed by the current obscurity of technical analysis. Obviously there is a technical analysis circle in existence, but it pales when compared to the rest of the trading community. Virtually no people start their trading journey with a plan to use technical analysis. Traders almost always get started using fundamental analysis and stumble on technical analysis either afterwards... or maybe not at all.

A very likely cause for this is our exposure to mainstream newspaper and tv. Any time you turn on the news, the headlines are likely to be about growth rates, layoffs, or perhaps if we are lucky- the latest lawsuit.

I guess “CFO ponzi scam” will usually pull better blog traffic than “moving average crossover divergence”.

So this means that the new trader is already prone to a certain style of trading. They turn on the tv, read a press release, and maybe read some exaggerated blog comments. This is a unsafe way to start, but for the beginner trader, we see it all too often. On top of this, fresh traders will often go towards small cap. The elevated financial risk is diminished by the prospect of stuffing away more stock and having a better chance at striking it rich.

Of course, I understand that the true fundamental guys are actually doing a bit more than just reading a blog and rolling the dice. But, the everyday newbie trader is not. The new trader is trading on random tips, news stories, and basically a load of speculation. The dilemma is obvious- average Joe is the last person in line to hear the press releases! By the time anything of importance makes its way to the general public, it has already been whispered to pals, partners, and just about anyone that is anybody on wall street. I love examining a stock chart after bad news is publicized. What? Trading volume jumped up a few days ago? I can not imagine why.

And for those of you who think we are all on a level playing field:

Whenever you are on a lovely sandy beach and want to take a swim, please be sure to not swim too far because you just might slip off the edge of the planet.

The potential for independence is really what should make technical analysis so attractive to the newbie trader. You aren’t completely reliant on the old information chain. Your principal methods are the charts, and the charts can not tell lies. MACD, candlesticks, and patterns are legitimate and you don’t need to think about an unstable threat just around the corner. Once you become familiar with a TA tactic, it does not abandon you and it can be implemented as you like, each and every day.

Every new trader should give technical analysis a swing, even if it just means doing a handful of paper trades. Turning off the headlines and depending on your own skill is a pretty amazing feeling. I will always remember my first technical trade. I spotted a breakout stock with a good pullback as well as a tiny flag pattern. I tossed a little cash at it and established a stringent stop loss. And after 3 trading days, I had brought in 40% and spotted my sign to sell. I earned 800 greenbacks on a stock that I discovered with my own eyes, my own personal judgement, and all from the enjoyment of my very own home.

Now THAT is definitely what I call insider trading!

To learn more, check out Will Thortons technical analysis course over at seethemarket.com.

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