Technical analysis can be very helpful for a trader. But what exactly is it?
Technical analysis studies the price movement of the stock. Technical analysis looks at patterns that have occured in the past to determine what will happen in the future.
So, the first thing any short term trader needs to understand is how to read stock market charts. There are things like support and resistence that can be helpful to understand. It is also important to look for different chart patterns. You probably also want to look for easy to read stock charts , this way you can recognize patterns a lot faster and be able to make decisions faster as well.
Technical analysis can give you great insight on the future of a stock, however by itself it will not make you a profitable trader. With all it’s benefits nothing is guarenteed.
The thing that really matters is a traders ability to manage money so that their wins are always big and their losses are always small. Having a wining money management strategy is just as important as knowing when to get in and get out.
The less money you lose when you are wrong the less often you have to be right to be profitable.
It is also important to work on your emotions. If you lose a few trades in a row you need to be able to shrug it off, and better yet see if you can determine why. Losing is part of the game, even if you have a winning strategy it is not uncommon to lose 3 or 4 times or more a row. Life has it’s ups and downs and trading is the same way.
In the end understanding technical analysis is going to help you trade the market in the short term. But only when it is combined with things like risk management and emotional control will it be profitable.
