How to use Technical Analysis to Make Money on Stock and Forex Trading
What is the secret to make consistent profit in stock and forex trading no matter you are day trading, swing trading, or long-term investing? The answer is technical analysis.
Step 1
Trading in the stock market can help you make money fast or lose your hard-earned money easily. With understanding of technical analysis, it will allow you to make better decision on entering or exiting a position.
Understand what all indicators mean
I think these indicators are more important:
-Simple Moving average (20 SMA, 50 SMA)
-MACD
-RSI
-Volume
Technical Indicators and Overlays:
http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators
Technical analysis is the soul of day trading. Please take time to get familiar with all the tools you can use. Technical traders only trade when they see a particular indicator or pattern.
Candlestick chart is more understandable
In candlestick chart, we can easily see and compare the relationship between the open and close, the high and low of a stock price movement.
If it open low and goes lower but eventually close back up to form a long shadow line on bottom, that means the bottom has been tested and the chance is high that it will go up higher.
If it open high and goes higher but eventually close below open price to form a long shadow line on top, that means the top has been tested and the chance is high that it become the pivot point to go down.
Learn how to read candlestick chart and its pattern.
http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis
Support and Resistance
If the price breaks the resistance line, it will go up higher. If it breaks the support line, it will go further downward.
Trading rules
Once you understand how to read technical analysis chart, you should come up with your own trading strategy. This is a must in order for you to survive in this brutal market. You must have systemic rules, rules for your trading game that you must follow. These rules tell you the best time to enter or exit a position from technical analysis chart.
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