When I was a kid, I was a bit sloppy. My mom was always on me to clean up my room. In college, I was no better. Living with three other guys didn't exactly turn me into a neat freak. Our house probably should have been condemned. But as I've gotten older, I've come to crave order in my life - so much so that I was shocked when I heard myself pleading with my daughter to please clean up after herself to keep the house looking nice. Nowhere is that desire for order more apparent than in my trading. Maybe it started at the beginning of my career as an assistant on a trading desk, back when I couldn't make any sense of the numbers dancing across my screen. I was clueless as to how traders decided when to buy and sell. I needed some way to create order out of all of those numbers and symbols. Now when I trade, I use technical analysis. Technical analysis - the use of stock charts to inform buy and sell decisions - is great for creating a trading plan. As I always say, technical analysis is not a crystal ball. But it does help you increase your chances of being right and, just as importantly, minimize your losses when you're wrong. Everyone's trading style is different, and there are lots of technical analysis tools that fit any individual's preferred method. As a long-term investor, I'm a value investor. I like to buy beaten-up stocks and watch them bounce back over time. So it's no surprise that, as a trader, I do the same thing - just with a much shorter time horizon. With the goal of entering a trade at a discount, I may buy a stock that's predominantly moving up a trend line and yet has momentarily returned to support - the price level at which a stock's downtrend reverses. For example, if I were interested in buying Nvidia (Nasdaq: NVDA), I would wait until the stock returned to the blue trend line, which is acting as support. See that in action in this chart... |
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