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Hello, I been buying and studying a few stocks since 2008. But mainly I used a fundamental anaylsis approach of determing if a company is undervalued. I mainly study the company's valuation, finical health, and managment to determine if its a good buy or not. Then I buy the company's stock and hold on to it for long. Three company I tell you thats undervalued is LEE, CNO, and BZ.
Now, I want to get more into trading stock short term for profits. No day trading cause I work fulltime, but one or two trades a month. I just wanted to paper trade first for learning.
But I discovered my problem is determining when to buy a stock. Do I use technical analysis to determine when to buy/sell a stock for a short term trade? I see alot of traders stating to read the charts.
For instance with LEE and TGC, I wanted to short trade both stocks for quick profits, but I didnt know when to buy. Will technical analysis help me with this? I wanted to buy LEE today at $2.88 but couldnt pull the trigger. For TGC, I didnt know whether they was going up or down, so I didnt buy, the same with LEE. Do I need to learn technical analysis and reading the charts to gain this type of knowledge?
I know this is not the answer you're looking for but I just want to show you that if you followed a computer program to tell you when/how to trade, in the case of LEE, your $100 would have been $37,286 (minus transaction costs i guess) in 2 years. Entertaining to say the least. Definitely a nice way to learn the candlestick chart
LOL, thanks for that information. Well, I dont want to follow a computer program with my money. But the website is nice for learning why they issued BUY, SELL, or HOLD for a stock. For instance, I want to learn why they put a HOLD on buying/selling LEE.
So is technical analysis needed to make the determination when to buy or sell for short term trading? Im trying to decide that after I do my due diligence with determining if a stock in undervalued, do I need to perform some technical analysis and decide when to buy?
There are many books discussing the relative merits of fundamental vs technical analysis of stocks. Not sure if one has proven better than the other. Buffet has said he has tried technical but doesnt really understand it, so it doesnt work for him. Others and computers seem to be based on it Find what works for you.
technical analysis DON'T work. It works if you are a educationer or a vendor trying to sell your system. If technical analyst work, then there will be no CTM. The CTMs would be millionaires, billionaires many time.
The only that work is price. When price is going up in strong momentum, then you will buy on a pause or a short pull back.
Isn't technical analysis the study of price action?
I'm in the camp that believes selling is far more important than buying. Be prepared to take some small losses and be disciplined about quickly selling off stocks not working and letting your winners ride longer than your initial instinct suggests. Buying just becomes a matter of finding stocks with reasonably good relative strength and above average volume on up days.
also get ready for the tax man. All your gains taxed at standard income tax rates! Not sure how much income you are making right now but you could be paying as high as 35% plus state income tax. If you hold for longer than 365 days then you only pay a max of 15% and it can even be as low as 0% if you make less than 34k single. Something to think about.
If you insist on short term selling then go for it but the better idea is to buy a stock and hold it for at least 365 days and then decide if you want to sell it or hold on to it. In the long term deciding to sell short term or long term amounts to alot of money.
yes and no. When I look at technical analysis, its a study of supports/resistants and indicators.
Price action just study of price.
Just put it this way, if you can buy in the middle of the chart, then technical analysis is great. For the rest of us that must buy on the right of the chart, then we need price action. Let me give you an example.
Technical analysis IS the study of price action itself and derivatives of price action. S/R and technical indicators are just two elements of it. How effective TA is depends on the USER and the kind of TA used. For example, not everyone using TA would have seen the price action in the first chart above as an opportunity to jump in--I certainly wouldn't have. And those who DID jump in, if they were smart, placed tight stops somewhere below "support," so their losses would have been minimal once the trade moved against them.
But to answer the original question, the shorter your trading timeframe, the more important TA is. The longer your trading timeframe, the more important FA is. Daytraders or short-term swing traders typically use TA ONLY. Many longer-term traders will use a combination of both: FA to determine which stocks to buy and TA to time the entries/exits.
I should add that if you're going to use TA like many traders use TA--too much importance placed on technical indicators as described in all of 'Trading For Dummies' type books--TA may not help you.
also get ready for the tax man. All your gains taxed at standard income tax rates! Not sure how much income you are making right now but you could be paying as high as 35% plus state income tax. If you hold for longer than 365 days then you only pay a max of 15% and it can even be as low as 0% if you make less than 34k single. Something to think about.
If you insist on short term selling then go for it but the better idea is to buy a stock and hold it for at least 365 days and then decide if you want to sell it or hold on to it. In the long term deciding to sell short term or long term amounts to alot of money.
Obama raised the capital gains tax on long positions to 20%
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