● Where to Find the Best Stock Charts?
If you want to learn technical analysis, you’ll need to find a place to get stock charts. Two great places are www.bigcharts.com and www.stockcharts.com. They’re both free websites with interactive charting, complete with all the bells and whistles. You can also pay if you’d like more features. If you eventually want to upgrade to a pay charting service, there are very many to choose from.
● Back Testing and Trading Systems
If you start to study charts long enough, you start to ask yourself questions—what would happen if I bought every time a stock crossed above its 20 day moving average and then sold when it crossed below it? What if I bought every time the RSI was oversold then sold when it was overbought? Etc, etc... You can scientifically answer questions like this through a process called back testing. You enter buy and sell rules into a computer, then the computer goes back through history and shows you what would have happened. You do this until you find a profitable method that has worked in the past, the rationale being that what has worked in the past may also work in the future. Eventually you can come up with your own set of buy and sell rules and create your own trading systems. Your trading systems can then be put on “auto pilot,” so to speak, and a computer will enter buy and sell trades for you. If you find trading systems that are profitable, you’ll literally turn your computer into a money making machine. Usually the best stock chart packages also come with backtesting ability.
● Buying/Using Trading Systems
Although many people enjoy researching and implementing trading systems based on technical analysis, others decide they’d rather let other people do the work. For those people, buying or using someone else’s trading system is an attractive option. An innovative website which allows people to post their trading systems, and which allows people to easily subscribe to those systems, is www.collective2.com. Another great forum where people discuss creating trading systems can be found at www.wealth-lab.com under “user forums.”
● The Future of Technical Analysis
Before computers became commonplace, technicians had to manually draw charts. Even worse, they had to do all the calculations themselves if they wanted an oscillator or a moving average. Perhaps that’s why TA hasn’t become popular until relatively recently.
Today’s computer technology makes technical analysis incredibly easy. But more than making it easy, computers are changing the way TA is practiced. There are programs that can recognize chart patterns and others that claim artificial intelligence. It’s amazing what kind of charting technology is being developed. Maybe these programs work, maybe they don’t, but you can bet some of the smartest computer programmers on earth are working diligently applying their skills to the art and science of technical analysis.
If you’re serious about learning technical analysis, then get ready for a wild ride. It’s sure to change in unexpected ways as computers become more sophisticated. But no matter how much technical analysis will change, or how sophisticated computers become, TA ultimately boils down to the basics described in this handbook.
So good luck with your investing, and happy charting! |
