Trading stocks and commodities can be a very financially rewarding endeavor if one has the proper education and approach, and is disciplined enough to follow strict rules.
It is a fact that ‘return OF your capital’ is much more important than ‘return ON your capital’.
Needless risk taking and ignorance about what is to be expected is nothing more than gambling and what we want to do is speculate, not gamble.
The difference between gambling and speculation is that in gambling the odds are stacked against
you and set by the gambling establishment. In speculation we control the risks – when to buy and sell and at what price, how much to buy and sell, and how much to risk on any trade. Many times we can set those odds 90% in our favor.
Speculation and gambling are two different actions used to increase wealth under conditions of risk or uncertainty. However, these two terms are very different in the world of trading. Gambling refers to wagering money in an event that has an uncertain outcome in hopes of winning more money, whereas speculation involves taking a calculated risk in an uncertain outcome. Speculation involves some sort of positive expected return on investment—even though the end result may very well be a loss. While gambling in markets is undertaken with the main aim of making an immediate gain/profit on price movements, speculation is undertaken with the aim of benefiting from perceived market inefficiencies – i.e., the speculator believes that the market prices are wrong, and that they will correct when others correctly analyze the market.
Technical analysis is the study of price patterns and volume fluctuations. The theory, which really can’t be disproved, is that all known ‘fundamentals’ are revealed in the price action of the stock. Even if a company has a secret oil or gold discovery on its property, as soon as someone finds out it will show up in the price action of the stock as it goes
up on increasing volume. The ‘fundamental’ news may be covered up for a year or more
Some traders also are ‘tape readers’ as opposed to ‘chart readers’. Tape readers simply look at the ticker tape and various news feeds and watch the price action for unusual blocks of volume and up ticks or down
ticks in price action. Horizontal support and resistance is the key here.
While this method has made millions for countless individuals I prefer chart reading for trading. The chart gives so much more information than just one day’s tape, and time cycle analysis can readily be applied to the
chart patterns to predict the future. This book will show some of my methods of chart reading trading.
To start our study we need charts. I use Amibroker,timing solution what time period do I set my chart windows
Certainly you need a daily chart and also an hourly one. These are the two essentials but for most professional trading you will also need weekly charts and sometimes monthly, and usually 5 minute or 15 minute charts.
When trading as opposed to investing you should not be afraid to be stopped out frequently.