How To Read My Charts!
Ok well before we get into the good stuff a few board rules to go over..
1. No Bashing or Pumping Stocks will be tolerated, that rule also applies to pumping and bashing other members on this board. (Exception: we can stroke each others egos after we make a few bucks)
2. Fundamental(news, company info ect) and Technical(chart) Analysis are both welcome here, I will be covering Pinks, Otc and Even Big Boards like Nasdaq. Fundamental and Technical analysis are the two most important pieces of information every investor should know before making a trade. By eliminating either one, you decrease your chances of making smart trades.
3. We are here for one reason and one reason only, that is to make some money! And yes, we can also be friends too.
Now the basics:
I go with simplicity. I don't over clutter my charts with a million different indicators. It can sometimes be confusing as some may give you false signals while others give you good signals. I go with what works for me. Other analysis may like other indicators and that is perfectly acceptable because as any chart reader will know: The 1st rule of charting is there are no rules. Chart analysis is more of an Art than a Science. Different people will have different views of what is happening technically in a chart. The ultimate goal is to use Technical Analysis to follow trends. Many people know that fear and greed drive markets. This fear and greed is driven ultimately by fundamentals in the underling company. What many people do not understand is that charts are simply a tool to determine the level of fear and greed that is occurring in a market, and if used effectively, to eliminate your own emotions during a trade. The second rule of Charting is to never let fear and greed control your trades. This will kill you a million times over. It feels good to ride a stock up but you also need to plan your exit and don't be afraid to take a loss before it grows. We all make bad trades, just learn from your mistakes. Some Chart Theories Trends:I follow trends. Stocks with volatility will always either being in a Buying Trend or A Selling Trend. This is important to understand because you always want to enter at the earliest point when the Buying Trend begins, and exist when the Buying Trend Ends.(unless you are going short then use the opposite theory) You will see these trends marked on my charts with red and blue lines. A rising Blue Line is a Support Line that will push a Price higher. When the Support line is violated it will signal a end to the trend, and a reversal into the opposite trend will take place.
Indicators:
I basically only use 2. Some may use more but I like simplicity and stick with MACD and RSI. MACD is simply 2 exponential moving averages and when they cross each other they can give buy and sell signals that usually coincide with the trend support and resistance lines being violated. I always go with the trend line first. I like to use the MACD as a confirmation that I am looking at the correct trend line. If the Trend Line Breaks and the MACD line is not crossing, I may not have 100% confirmation that a trend reversal is taking place. At times the MACD can give false signals under extreme volatility so I take that into consideration as well. RSI can give overbought and over sold indicators. I use this less frequently but generally when a RSI is over 70, it is showing a lot of strength and could be in an overbought scenario.
Volume:
Volume is quite often overlooked by many people but it is of very big importance. Volume indicates interest in a stock. When volume is high, interest is high. When volume begins to enter in a stock during a period of low volume it says first off interest is back in the stock. If the price begins to move upward it is a early indication of a Buying Trend. As volume slows down off it can indicate interest is decreasing and the stock may soon reverse downward. In a selling trend it can also be important and a big increase in volume can indicate a bottom of the selling trend.Volume near support and resistance is also of importance. Increase in volume near support suggests support will hold. Low volume near support suggests support will fail. A continuation or increase of volume near resistance suggests resistance may be broken. A decrease of volume near resistance indicates a decrease in buying interest, and suggests that resistance will hold.
Moving Averages:
Moving Averages are a common among many people traders. Popular moving averages are 10 Day, 50 day 100 day and 200 day. Some traders will use these as support and resistance lines and should be taken into consideration.
Patterns:
Triangle, Pennant, Channel, Wedge, Double Top(bottom)I would suggest a simple Google search if you are unfamiliar with any of these terms to see what they are. They can indicate consolidations, reversals and trends and should be understood by all chart readers.
Recommended Reading:
If Anyone wants to sharpen their TA skills I strongly recommend picking up the following book!
Technical Analysis Explained : The Successful Investor's Guide to Spotting Investment Trends and Turning Points By Martin Pring
And always use your own Buy and Sell Signals. If you wish to use mine that is fine, but I will never be responsible for any of your trading decisions.
Happy Trading. Let's make some $$$!
