Technical Analysis
Rather than just depend on Fundamental Analysis, you can also make money from technical analysis, or chartist.
This technical analysis have different different types of method such as candlestick, MACD, money flow, trend line, Ichimoku, Bollinger Band, etc. Each method use different formula and data. After analyzing the data, it will tell you whether got buy signal or sell signal or no signal.
How it works? Buy when there is a buy signal. Sell when there is a sell signal.
Even if a stock is a very good fundamental stock, if nobody buy, the stock will not go up. Technical analysis will give you the signal when to buy.
RISKS, LIMITATIONS OR DIFFICULTIES:
Sometime they create conflicting signal. Some method may have buy signal, but some have no signal or even sell signal.
It uses a lot of “IF”. If it cross $5.00, buy, but if it drop back below $4.70, cut loss.
If it cannot break 1524.69 point, it will crash. If it drop below $1.27, sell.
If it drop below 1430, then the next support level is 1400.
I find that it has too many IF. IF here IF there. What is all these IF about?
IF IT DROP BELOW 1430, THEN THE NEXT SUPPORT LEVEL IS 1400. Means what? Can buy now? Sell now?
Your profit may be less because Technical Analysis ask you to wait.
Example now is $4.76. It says IF it breaks $5.00, then buy. So you waited and it breaks $5.05 and you buy it. Imaging if you didn’t wait, you already bought it at $4.76, but now you bought it at higher price $5.05.
Furthermore, Technical Analysis contradict with fundamental. This is because fundamental say when the price drop lower, the cheaper the stock and buy more. But most of the times, technical analysis give buy signal when the price has gone up, and the higher it goes, the more bullish signal it has.
Because many stocks lack of volume and the price can easily be influenced by small quantity of buying and selling, so the technical analysis can’t work. As you know in Malaysia
I think it is not easy to learn because not many people are using it. Not many means in terms of percentage. Most of my friends that invest in stock market, only a few use technical analysis.
Technical analysis need high discipline. It does not bother about fundamental. So when it is time to cut loss, many people refuse to cut loss even they have bought stock that have poor fundamental.
On 26 January 2011, got two popular Malaysia blogs both also using technical analysis, one said AirAsia can consider to buy AirAsia, one said cannot. How?
OPINION
I think you can learn on technical analysis and see whether it works. You can test out on historical prices before you really trade. Please remember to cut loss.
Some people suggested to use technical analysis with fundamental. Use fundamental to select stock and the timing is by technical analysis.
Anyway, I’m not good in technical analysis, I’m learning. You may want to seek advice from others who are experienced.
For more info on 52 Ways of Making Money in Stock Market……..
Thanks
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