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0.0.0.0 My Misadventure with Investing - how to start?

John666John666 ✭
in Using Technical Analysis

Hi all,

Hope you have a great day ;)..

I'm John and have been flirting with investing for more than 5 years and now I'm finally willing to commit..

0.0.0 Problem:

0.0.0.0 Think in words, not numbers - a. write


poetry + b. short stories.

0.0.0.1 See patterns, that aren't there.

0.0.0.2 Unsure of news sources to use.


1.0.0 My approach to investing:

1.0.0.0 Look at the daily and weekly charts.

1.0.0.1 Time my entry/exit via the 4h chart.

1.0.0.2 Use rsi, stochastic rsi, dma.

1.0.0.3 Use investing.com for news and capital.com

1.0.0.4 Use head-and-shoulders and double tops &

their mirror images.

1.0.0.5 Trying to get in the head of the other investors -

a hit & miss for me.

1.0.0.6 Use paper trading for the moment

with the capital.com app trading CFDs.

1.0.0.7 Cannot open a broker's account as a foreigner in the US and not enough $ to open 1 in my country.

1.0.0.8 Lost ~$300 paper trading BTCUSD & ETHUSD CFDs with 1:20 leverage and small trades: ~$60 TP &

~$55 SL with 14Ds of trading..



2.0.0 A better approach:

2.0.0.0 a. Incorrect indicators?

b. Incorrect application of them?

2.0.0.1 Cognitive biases -

used this -

https://capital.com/top-50-cognitive-biases-list?utm_source=InvestmateApp&utm_campaign=settings_app&utm_medium=50_bias

any other biases to look out for?

2.0.0.2 Mismanagement of emotions?

2.0.0.3 Incorrect timing of trades?


3.0.0 Accelerating my progress:

3.0.0.0 How do you become less blind to the markets?

3.0.0.1 How do you learn to id trends across commodities, stock, currencies & crypto?

3.0.0.2 What do most rookie investors fail to do?


4.0.0 avoiding pitfalls:

4.0.0.0 what are some common mistakes?


5.0.0 missing info:

5.0.0.0 do you need more info?

Cheers,

John

Comments

  • Options
    markdmarkd mod
    edited August 2021
    A lot to take in.

    There is a saying, a profit from the market is the hardest easy money you'll ever make. Forget about easy money. Market success takes commitment.

    First decision to make is, are you investing for long term, large gains, or trading for relatively short term, smaller gains? You need to know your own temperament.

    If you are investing, then fundamentals come first (sales, revenue, earnings, etc.) and technical analysis second, if at all. Investing is a more "intellectual" approach - it's for people who want to understand why they should put their money here or there. It's sort of like gardening - you choose what to grow in this soil and this climate, and you plant and you watch and you wait.

    If you are trading, then you want to pay attention to technical analysis tools. It's a more statistical approach to identifying market behaviors - it's not about why a stock is moving, but how. It's sort of like hunting - you learn your prey's habits. Get familiar with a small handful of the most well known indicators. THERE IS NO PERFECT INDICATOR. They all work sometimes. They all fail sometimes. There is nothing you can do about. No amount of refinement will change it. When a stock moves from a trend to a range, the good trend indicators (like MAs) will fail. And when it changes from a range to a trend the good range indicators will fail (like stochastics).

    Decide how often you want to trade, and how long you want to hold a trade and how much you can bear to lose. Some people need rewards everyday, some people like to stalk for a while, then pounce and hold on. Some people are ok with sitting on a loss while waiting for the trade to pan out, others can't bear to carry a loss. No matter what you do, you will have losing trades and most of the time your winners will be relatively small with some occasional large winners if you catch a trend and can stay with it. There are no quick profits unless you happen to catch a ride and rides are usually few and far between in every time frame. You cannot make them happen and you will miss some of them. In fact, you cannot make anything happen in the market. If you need a sense of control, the markets will not provide it.

    Here's a link that might be helpful:

    https://school.stockcharts.com/doku.php?id=overview:richard_rhodes_trading_rules


  • Options
    John666John666 ✭

    Now, from my perspective more people are going into the markets, because of the global lockdowns..

    If I apply the rules I learned on the chart school site, then that means that a rational investor should use tech analysis almost exclusively, because most people are irrational, emotional beings and this creates noise, chaos in the markets.

    Fundamentals analysis is some kind pie in the sky method, that assumes people are rational..

    What do you guys say?

  • Options
    lmkwinlmkwin ✭✭
    Fundamental analysis is studying what other interests say. Technical analysis is studying what other interests do.

    The only way that you will make money from a security investment is from technicals.

    "Investor" and "trader" can be influenced by fundamentals, but the only thing that makes or takes money is a technical move from point A to point B.

    It's better to own good looking charts and let someone else own the bad looking charts.

  • Options
    markdmarkd mod
    edited August 2021
    Institutions and hedge funds move individual stocks over the long term. They don't use technical analysis to decide whether to buy several million shares of a company - a position they cannot easily get out of. They want to know if the company can make money and that is based on fundamentals - the company's and the economy's. They employ full-time, top of their class MBAs to find those companies. That is not to say there is not a lot of me-too-ism, or that they can't be wrong, but those who get there first - in or out - do best.

    Technical analysis is a way of spotting what the big money is doing and hitching a ride. Big money usually leaves tracks. For instance, the public never buys a down trend (in meaningful numbers), so if you see big buying at new lows, it's a message. The stock may not turn up for a year, but its not going much lower. Vice versa at the top. The public doesn't sell a stock making new highs. So if there is big selling, it's the institutions cashing in. They may be early, or even wrong sometimes, but in general, don't expect much more upside for a while, and think about the possibilities for a trend change.

    So, TA is a way for the "poor" man, who doesn't have the resources, the training or the time to follow fundamentals, to get in on the game.
  • Options
    candidcactuscandidcactus ✭
    edited August 2021
    Hmm! I use almost exclusively technical analysis. For me, it seems like none of the indicators are great tools as given. You adjust the parameters. You add moving averages, then adjust those looking for crossovers of an indicator or a price, and keep changing and adjusting those to find a place where they work. You scan for stocks that look like they are at the optimum point that your approach says they are about to go up or down, and are not near a point you'd expect them to reverse soon if they move in your direction. I notice I used the word about. You can scan for all of this. BUT

    Do not buy a stock you expect to turn around
    Only buy stocks that have turned around shortly after your approach has said they should have.
    Whatever time frame you are using, let there be at least 2 bars since the start of the movement before you invest/trade
    Don't grab onto a boat anchor
    None of anything here is written in stone - but it is helpful guidance
    I expect that if anything here is disagreed with, you'll hear about it. We all do it differently.


    You backtest all approaches by using the inspect tool to see if what you think should work has worked WELL in the past. A good approach should work well with most stocks in the universe you are working with. It's good to have several Good approaches to see how well they are in agreement. It might be a good idea to think about what characteristics you'd like the stocks in your universe to have, and then scan for those. This can be for things like price, average volume, indexes they are in, growth patterns, volatility. Whatever approach you end up with for selecting stocks to buy, you can also use this approach, perhaps a little differently, to tell you when to get out. Most people lose their money because they don't know when to get out. You didn't get in at the perfect time (at least 2 bars), it's OK to not get it at the the high. If you try, you'll end up regretting it.

    If you are new, don't expect to make money for awhile. All of this takes practice. A good huge gain can defer developing a good approach for a long time. Work with a fraction of money you are willing to lose - but DON'T lose it. Never invest more than 25% of your money in one security, and that's a percentage for experienced traders. Beginners should invest less. I've only had that much money in a stock once - by mistake. I thought I was investing one amount, but accidentally invested 10 times that. It was going up fast, so I followed it for the day, and after it reversed hours later, I gradually sold all but 10% of it. I'm sure there are good discussions of money management online. That wasn't such a good example.
    I know I don't want to share the tools I have spent many years developing, but I am sharing the techniques of finding and developing them it took me just as long to develop. Good luck!
  • Options
    John666John666 ✭

    Cheers,

    So,

    You're basically saying test everything & believe nothing..

    From my understanding the markets get less chaotic & trend more in the higher timeframes - 1w v. 1d.

    Now, how many trades a month you do & why?

    Have a great weekend,

    John.

  • Options
    candidcactuscandidcactus ✭
    I really don't want to talk about the specifics of my trading. I think you should begin what you think you want to do, and put out questions as they come up to the community. This forum is for users of StockCharts, and most of what I do requires an Extra account. I've tried to be helpful, and wish you fruitful trading.
  • Options
    John666John666 ✭

    I guess we'll leave the teaching to the experts.


    Take care,

    John.

  • Options
    lmkwinlmkwin ✭✭
    I'd say that your best trends will be identified on the highest scales and then work back to lower scales for entries. I'm not a trader. On average I do more buys than sells. I use point and figure charts for most of my analysis. On a time based chart, start with a Monthly chart would be a good way to see the big picture and once you see the big picture, you can zoom into the smaller time frames.
  • Options
    lmkwinlmkwin ✭✭
    So if the big picture shows choppy trends or no trends, you can assume that if you were to get involved, that it would be for a trade. If big picture shows a trend, then only get involved in the direction of the trend. The trend is your friend. Play nice with your friend.
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