Invest Wisely

Is Stock Market Technical Analysis Useful Or A Hoax?

Investing in The Stock Market is incredibly hard to do, or at least hard to do correctly!  Make even one simple mistake and you can see years and years of hard work and careful savings disappear quicker than the blink of an eye!

Because of this, it’s not hard to understand why so many investors, both professional investors as well as amateur individual investors like you and me try to find methods of trading to stack the deck in our favor.

We all wish we had a magic crystal ball or special tea leaves that would tell us the future.  But those tools were the tools of the dark ages.  Today we live in the computer age where our tea leaves come from technology and things like charts and stock market technical analysis.

But does technical analysis really work?  That’s exactly what I’m going to discuss in this article today.

First off, what is technical analysis?  To define it simply, it is the use of past historical charts of a stocks performance in order to predict how that same stock will act tomorrow or down the line even further.

It uses very snazzy looking charts, and difficult seeming math and statistics (and statistical software packages) to give “signals” that are supposed to give you a leg up and predict how well a particular stock will do.

Many traders live and die by these charts (they even call themselves “Chartists”). But does this method really work??  I have the answer.

College researchers have long ago answered this question. The answer is a resounding NO! Even so, the charting industry lives on….it “seems” like it should work, but it doesn’t for a very specific reason. Well, two reasons actually.

The first main reason why it doesn’t work is called transaction costs. Charting DOES work.  It WILL show you ways to make a penny here, and a penny there, almost guaranteed.  But it doesn’t take into consideration the transaction costs.  You might be guaranteed to make 12 cents on the trade, but it costs $9 to trade stock at your online brokerage account.  

Also, many times to make a profit you have to buy and sell hundreds of times, earning pennies per trade. Again the problem is transaction costs eating away at those profits.

The second reason charting doesn’t work is more esoteric.  If everyone can read a chart and buy a certain stock based on what the chart says, then suddenly you get a bunch of people all buying the same stock for the same reason.  This massive out of the ordinary buying changes the supply and demand picture of the stock and moves the price on its own, throwing off your charts projections!

It’s sort of like when the world found out that stocks go down right before Christmas.  Investors noticed this, and started buying right before Christmas when they “knew” stocks would go down.  So many started doing this, that their own buying started making prices go up around Christmas.  It’s the same problem that chartists face.

So there you have it…stay away from technical analysis and all chartists!

About the Author

Jason Markum has been writing articles online for over thirteen years.  When not writing about investing, Jason runs a electric shavers for men web site where he reviews the best remington electric shaver for your shaving needs.

Stock Market Technical Analysis For Swing Trading

Audioseminar CD Winning Methods of the Market Wizards with Jack Schwager $29.99 Live Audio CD from Traders EXPO seminar by The renowned “Market Wizards” author and Trader’s Hall of Fame award winner presents a powerful workshop highlighting the most common traits and techniques of the super traders. This rare session can help investors of all skill levels become market masters. Whether you’re an active trader, or simply want a better understanding of how to succeed in today’…

Audiocasette tape of live trading seminar Proven Chart Patterns: Key Indicators for Success by Chris Manning In this audio tape from live seminar, master trader Chris Manning presents proven, reliable chart patterns that pinpoint buy/sell signals for short and longer-term investors – plus precise indicators for developing each pattern. Manning’s clear, comprehensive style is easy enough, even for those new to technical analysis. With a focus on using chart patterns to profit from today’s markets – and se…

Boosting Returns: New Twists to Time-tested Trading Techniques with Tom Gentile [VHS] $64.95 …

VHS Boosting Returns: New Twists to Time-tested Trading Techniques with Tom Gentile $64.95 Discover powerful twists to proven trading techniques that will help boost trading profits – in good or bearish markets. Tom Gentile’s comprehensive workshop, with online support manual, features an array of time-tested trading concepts and shows how adding his own, proprietary options strategies to these methods lets you boost returns, limit risk and profit from the directional moves. From his fr…

Top-Ten Rules for Successful Trading: A Pro’s Private Collection with George Kleinman (DVD) $29.99 After decades of trading commodities and options, traders often develop a master list of “Golden Rules” they strictly follow to maintain sustained trading success. Now, Trends in Futures newsletter editor George Kleinman provides access to his private collection of most treasured, most powerful trading precepts. Applicable to a variety of trading scenarios and market conditions, Kleinman shares hi…

501 Stock Market Tips & Guidelines $17.9 The 501 stock market lessons, guidelines, and tips provided in this handbook are grouped by various topics such as buying, selling, planning and research, picking winning characteristics, company analysis, valuation, price-earnings ratio, price performance, market behavior, technical analysis, and monitoring the economy. Both novice and experienced investors will find this book useful as each tip is short, to the point, and grouped together with tips that address the same topic.

7 Secrets Every Commodity Trader Needs to Know $138.77 The stock market has always intrigued me. The dynamics of finding sound companies prime for growth and profiting from their successes has an overwhelming attraction to most investors. Commodities, a shrinking investment realm by comparison, has always given the appearance of an all or nothing, rags to riches, dreamland. The truth is, however, commodities is enriched by concrete concepts and leveraged opportunities while the stock market holds the dreams of the derivative ownership in a company made up of more unknowns to the average investor than one would care to acknowledge.My interest in commodities came about when I was introduced to leverage. Imagine being able to find a profitable strategy and then using the concept of leveraging your capital to create an exponential growth of profits. This is not merely a fantasy, but a reality found when properly investing in these markets. This book is designed to show you how to accomplish this ultimate goal by becoming a complete trader.What is a complete trader? A complete trader is one who maximizes their utilization of all of the tools and information available to them within a given market. This means combining the knowledge of technical tools and charting, gaining scope and perspective on the historical and present fundamentals of a market, and using proper trade designs to accomplish a risk managed and profit maximizing approach. Thus, using the tools and information available to minimize mistakes, control losses and maximize trade design to accomplish consistency in profitability. Every one of the secrets you are about to uncover in this book are about making you a complete trader. Anyone can make some simple technical forecasts,gain knowledge of the fundamental history of a market, and use futures or options to trade a market. But how many traders can make the analysis and decisions necessary to be a consistently profitable trader?While exact figures vary depending on who you ask, they say 90% of commodit

Be Smart, Act Fast, Get Rich $24.95 A balanced strategy for making the most in today s stock market In today s markets, there are literally thousands of stocks available to trade or invest in, and every day some of those stocks make big moves. The reasons behind the moves may vary, but the ability to be positioned for those moves can create a constant stream of profits. Be Smart, Act Fast, Get Rich will show people how to actively invest and trade stocks using strategies that eliminate emotions and incorporate fundamental analysis and charting to avoid the mistakes of the crowd. The balanced approach and observational skills taught in the book will enable investors to capture profits made from the swings in the stock market. With this book, author and independent Wall Street analyst Charles Payne describes how to evaluate the health of the overall market and shows readers how to pick stocks that are poised for big moves. He examines the basics of fundamental and technical analysis, and illustrates how investors should apply those two disciplines to stock picking. Weaving stories of his own growth and development as a top Wall Street analyst with stories of investors who exemplify the dos and don ts of trading and investing, Payne details the best way for readers to maximize profits and minimize losses in today s stock market. Charles Payne (New York, NY) is the founder and Chief Analyst of Wall Street Strategies. He has been a guest on several well-respected financial radio and television programs and is widely recognized in the media as a leader among the analyst community. He is currently a contributor to Fox News Network. Payne is routinely sought after by several prestigious newsorganizations for his market opinions and has appeared as a speaker at many investor conventions and conferences.

Elliott Wave Simplified $12.42 Puts Elliott Wave theory into terms all traders can understand and successfully apply. – Larry Jacobs, TraderWorld.com & Traders World MagazineElliott Wave Theory is a highly effective tool to help determine the financial condition of a given stock and how it will perform in the near future. With the help of this book, investors will be able to easily understand and apply Elliott Wave Theory, and profit from the results! This book also shows you how to: – Combine Elliott Wave Theory with other technical analysis methods to produce optimal results.- Utilize methods for anticipating, and profiting from, both long-term and short-term moves among listed stocks.- Gain from real-time examples of stock market forecast and analysis.Use the practical information and numerous charts in this book as a hedge against adverse moves in the financial market-you’ll be glad you did!

Essential Technical Analysis: Tools and Techniques to Spot Market Trends $60 An Introduction to Technical Analysis from One of the Top Names in the Business Essential Technical Analysis is a highly valued resource for technical traders. The importance of comprehensive and well-researched market behaviors, indicators, and systems were well expressed graphically with many examples. No technical analyst should be without this book. Stevens s book could become another classic. Suri Duddella, President of siXer.cOm, inc. (Forbes magazine s Best of the Web in Technical Analysis Category) Essential Technical Analysis will give the new student of technical analysis a good overview of both classical chart patterns and a myriad of technical indicators, but so will many other texts. What sets this volume apart is that it presents the subject in the context of real-world trading situations, not idealized well-chosen examples. Books on technical analysis, especially those aimed at novices, are typically filled with charts in which the selected patterns are both unambiguous and work perfectly. As Leigh Stevens recognizes and confronts, however, the real world is a far more sloppy place: charts may often contain conflicting indicators, and patterns don t always work as described. Reading Essential Technical Analysis is like sitting beside a veteran technical analyst and having him describe his methods and market experiences. Jack Schwager, author of Market Wizards, Stock Market Wizards, and Schwager on Futures Leigh Stevens s depth of experience, acquired over many years, has generated a deep understanding of, and commitment to, the discipline of technical analysis. He is also oneof those rare individuals who have both the ability to convey the essence of his ideas in a wonderfully simple and straightforward way and through the use of personal anecdotes and experiences. There are not many people around who can both walk the walk and talk the talk.