After many years of struggling, in the end, I realise that identifying trends is still the most important skill in chart reading. Various indicators are mostly trying to catch small turns in the price directions. Since charts are based on historical data, the information we can get from the charts are mostly lagging. Using charts to catch immediate changes in price direction is quite difficult. However, for long term trading or investing, I think charts are more useful in telling us the future movement in prices. Certainly, for longer term investing, the market fundamental is still the major deciding force. Reading the chart helps us know where we are relative to the overall position. That in turn gives indication of when to buy and sell.
Many gurus advised us not to time the market. Certainly, that is fine if we consider 25 years ago when we have time and if we could set aside say $100K or more and we invest based on pure fundamentals, we would probably be sitting on $millions. That is because we could ride on the overall market growth. However, if you are now over 45 and you are unlikely to be able to set aside say $100K for next 20 years without touching it. Then, you are in a different position. You would probably want to make sure you are buying at low prices.
My belief is to use both fundamental as well as technical analyses to make investments in stock market. Use fundamental to select the company stocks that are worth investing. Use charts to decide when to make the purchases. Investing is a long term commitment but it does not mean holding on the the stock forever. Buy more during the market crashes and sell some during the bull runs. This reverse strategy should work best for long term investors.
In terms of timing the market, using trend lines should be the best. Using weekly charts and plot the trends and decide entry and exit points serves best. Patience is the key to this kind of investing. Stay in cash with little or no interest can be quite frustrating but that is part and parcel of the game.
Many gurus advised us not to time the market. Certainly, that is fine if we consider 25 years ago when we have time and if we could set aside say $100K or more and we invest based on pure fundamentals, we would probably be sitting on $millions. That is because we could ride on the overall market growth. However, if you are now over 45 and you are unlikely to be able to set aside say $100K for next 20 years without touching it. Then, you are in a different position. You would probably want to make sure you are buying at low prices.
My belief is to use both fundamental as well as technical analyses to make investments in stock market. Use fundamental to select the company stocks that are worth investing. Use charts to decide when to make the purchases. Investing is a long term commitment but it does not mean holding on the the stock forever. Buy more during the market crashes and sell some during the bull runs. This reverse strategy should work best for long term investors.
In terms of timing the market, using trend lines should be the best. Using weekly charts and plot the trends and decide entry and exit points serves best. Patience is the key to this kind of investing. Stay in cash with little or no interest can be quite frustrating but that is part and parcel of the game.
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