Decrease Your Technical Analyses to 2 Minutes or Less
There are literally thousands of stocks out there and there is absolutely no way you can go through all of them before you make your final decision on one and you want to actually invest/trade the company. Even if you can perform solid due diligence by hand, why waste your time when you have stock filters and research tools that help identify the good companies from the crap.
Assuming you already use stock filters and research tools, when you compile that list of companies that meet every criteria you are looking for, do you invest in all of them? Heck no. You still have to dig a little deeper. Usually that digging requires a little technical analysis.
Depending how strict you created your stock filter, the number of companies that get spit out at the end may vary greatly. If you’re list is extremely large, you’re going to want to create a method of TA that simply allows you to blast through the list.
Follow these quick steps to take down your TA time:
1) Switch to Candlesticks.
It’s cleaner and easier to read. Quite subjective I know, but you get every attribute an OHLC chart has and more in candlesticks.
2) Trend Analysis:
Create trend channels. The trend is your friend and going against it hurts more than it helps.
3) Identify the Support and Resistances
Remember the cardinal rule: Broken resistances become the next level of support and broken supports become the next level of resistance.
4) Pattern Catching
There are so many types of stock patterns and formations. Get to know a few and know them well. The top ones to know are reversal patterns. For example: Double tops, double bottoms, triple tops, triple bottoms, etc. Other good patterns to know are continuation patterns such as pennants, ascending/descending triangles, and even the cup & handle formation.
5) Look for Volume Hints
Look for increasing volume trends or explosions in volume. These are easy tells for action.
6) Minimize Your Usage of Technical Indicators
MACD, RSI, STOCHS, FIBONACCI BANDS, OBV, DMI, VOLATILITY, etc. There are so many indicators out there and all they do is create information overload. Follow 2-3 and leave it to that. I use MACD, STOCHS, and Simple Moving Averages.
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Once you get good following these 6 steps, you’ll have your TA time down with the quickness. Just keep it simple. The hardest part is recognizing chart patterns, but that will all come in time and repetitive practice.
Photo Credit: epicharmus
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Awesome article. Can you explain a little more about “cardinal rule: Broken resistances become the next level of support and broken supports become the next level of resistance”. Thanks
This is great information for people learning about picking stocks. I wish I’d had this much info when I started. Thanks
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True, these small observations can save time and worry. 2 minutes or less is not too shabby.
For those who’ve got the time and are a bit curious, I would recommend a book called Blink – by Malcolm Gladwell.
It is a compilation of research on instinctual (gut) decisions presented in a very entertaining and comprehensive way. The findings are certainly more concrete than expected.
In the “Blink” of an eye, you’ve already made the choice. Everything else is just reassurance. And analysis=self confusion; or in other words, “getting lost in dialog.”
Check it out, you won’t be disappointed.
For a list of similar reading material:
http://whitewillowtaichi.com/home/readings_research.html
can you tell me where on the web i could do technical analyses? where can i find this service for free thank you.
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Hi the analog system is define that Decrease Your Technical Analysis or in cress all is very impressive sharing.
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Finally, the current market environment will greatly influence what type of trading is appropriate. Mastering one style is very important, but also the trader needs to be proficient in others. If in doubt, stay in cash. Standing aside is considered a defensive position and there’s nothing wrong with waiting for an opportunity.
The lack of a volume spike on the day of the pattern confirmation is an indication that this pattern may not be reliable. In addition, if the volume has remained constant, or was increasing, over the duration of the pattern, then this pattern should be considered less reliable and may actually reverse.
It is commonly held that the length of the mast indicates the potential price increase. Like the Flag, the Pennant is considered to be a pause in a downtrend.
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I was unknown to predict support level and resistance level. Now your Article gave me a way to find this.
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Before using a black box system, it is important to back test the system. To do this, you will need an adequate sampling of test data. Please note that past performance cannot ensure future results.
Hi i think the stock price is likely to decrease. In contrast, if the stock has an upward price trend and has an increase in intraday volume, the stock is likely to continue to rise…
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Great post with nice info. Keep it up. I like it because something different.
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This is just a rough estimate but I find that 30-50% of their technical analysis to be simply wrong. This is in how they apply the theory not that the after the fact outcomes
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What are the worst technical mistakes a flute player can make?
This results in two types of observations: the identification of important methods, and the mistakes that violate these methods. However, if you have any other significant insights, please feel free to comment provided that you read the following constraints.
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I participated in a day long teleconference with Iraqi officials to present the final report and I was the lead presenter for the Oil Reserve and Infrastructure portion of the report.
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I want to know what out of fundamental or technical analysis is of most benefit for day-trading the financial markets if you want to consistently make money as I know from my practice experience that trend trading the minutes, hours and the days range, whatever the direction is good to follow to take in lots of little profits.
This is just a rough estimate but I find that 30-50% of their technical analysis to be simply wrong. This is in how they apply the theory not that the after the fact outcomes.Does anyone find the Bloomberg Technical analysis of the markets to be wrong?Thanks
Candlestick is awesome. It is even that candlestick alone has enough as weapon to do the trading — there is a pattern as well as the signal in it.
Every stock analyst will usually use an arithmetic scale when analyzing stocks over a short period of less than five years and a logarithmic scale when analyzing stocks over a period of more than 5 years. The main aim of a technical analysis is to establish a trend based on the time frame that you are trading. The assumption is that a trend will continue with the same direction until it tells you otherwise. Investors therefore believe that trend is your friend and therefore they base their trades based on the current trend.
A stock can either follow an uptrend, a downtrend or a sideway trend. An uptrend is usually signified by a series of higher highs and higher lows. A downtrend is usually signified by a series of lower lows and lower highs.
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