Technical Trading — Are you a Master or Jack?
Technical trading is basically reading price and volume charts, identifying predefined chart patterns, and using back-tested statistical indicators to time the entry and exits. There is so much to it. And honestly speaking, it can be overwhelming. For example here are some of the price patterns you can scan for and/or look for when analyzing a chart.
I always wanted to know it all, and be able to identify every chart pattern that existed. That basically meant wanting to become jack of all trade. It was not a good step and did not help grow my trading maturity curve. This is a perfect recipe for exhausting your mind and not be able to spot actionable trades.
What I learned after years of trading (and losses) was that I cannot master everything. One thing I always did as and when I entered a trade is that I wrote down my reason of entering that trade. Made it a standardized list of choices to pick my reason from. After sometime, I was able to analyze and see which trade types worked for me. Here is an example:-
Clearly you can see my strong patterns that I was good identifying & monetizing from were ’20 Day EMA Support’, ‘Inverse Head & Shoulders’, and ‘Bull Flag’ patterns. Therefore, instead of trying out everything, I starting sticking to trade types that gave me good results. Built scanners on stockcharts.com website. It helped me narrow down the list of stock candidates that met my specific criteria.
Here is an example of an Inverse H&S trade. Buy point is when the stock breaks higher from the right shoulder and crosses the neckline. This is not guaranteed, but as you analyze more and more charts, combine this pattern study with other technical indicators such as Relative strength index, Volume, Trend lines, Support and Resistance levels…I can confidently say that you will become a better trader.
All you have to do is trade these set ups over and over again. As you progress it becomes a second nature in even further narrowing down to stock candidates that will have a higher success probability. In other words, the trade that you will are likely to close in green.
Two Trading Rules I stick to:-
#1. Trade the Technical chart pattern you are good at identifying
#2. Repeat rule #1
The point is not to strike riches, but to create a steady cash flow with your trading skills. It is a journey. So Learn and Enjoy. And once you master something, give back to the trading community.
