Technical Analysis practically deals with the behavior of securities price and how to utilize that information to make money while avoiding loses.
Things to remember:
- Always be sensitive to risk.
- Controlling losses is more important than gain.
- Always have an entry and exit plan.
- Do not let greed take over.
The table below shows how much you need to gain to recover for losses:
Loss Gain Needed to Recover Loss
10% 11.1%
20% 25.0%
30% 42.9%
40% 66.7%
50% 100.0%
60% 150.0%
75% 300.0%
Buy Securities only when in an uptrend, avoid buying in a downtrend (wait for a reversal signal).
Notes on Dow:
- Securities prices move in trends much of the time.
- Trends can be identified with patterns that you see repeatedly and with support and resistance trendlines.
- Primary trends are changed by secondary movements (retracements) in the opposite direction of the primary trend.
- Trends remain in place until some major event comes along to stop them.
No single technique is 100% effective.
To Trade well is a skill that takes training, practice, and benefiting from mistakes.
