Winners never quitBefore we dive into the essential foundations on technical analysis, market analysis tools, and how to be a successful trader, there is still one more thing I would like to enforce:

Always remember that if you choose to embark on this journey, you must be committed and keep persevering… Giving up won’t lead to any success, and winners never quit!

Warning

This is no financial advise, all the content and the ideas present in this page and all the other pages of the website do not guarantee financial success and may lead to a loss of your money. You should always do your own due diligence before trading or seek professional advise.
If you want to learn how to trade risk free, you want to learn paper trading first. Check this tutorial out, I will take you through all the necessary steps to set up your free account on TradingView and place your ‘monopoly money’ traders in the real market.

Some of the links available in this page may generate a commission for the author.

How to make the difference with these market analysis tools

Those who thrive in this industry don’t make random decisions. And most importantly, they don’t follow the trends promoted by the news (as you may recall from our previous content The Mindset Of A Successful Trader).

In order to ensure that they do run their businesses like casinos, such traders have to analyze the situation carefully, which allows them to consider all finances, potential investments, changes they should make, future steps, and other key elements.

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How to make the difference with these market analysis tools

  • Winners approach trading with an analytical mind.
  • Winners are not affected by the Fear Of Mising Out.
  • Winners have a method and follow it with discipline.

The Main Market Analysis Tools

Nowadays, you can find various market analysis tools that demonstrate how to excel in this field. There are, however, two primary ones to which they all relate, which are commonly implemented in the stock market, both of which aid in researching and speculating equity prices.

We primarily focus on one of these analyses ‒ which is actually very normal as you will soon find out.

The two types of analyses are the Fundamental Analysis and the Technical Analysis. I began pursuing the world of trading one year ago, and chose to engage with ‘the Technical Analysis’ approach; I have continued to use it to this day while I am creating this content! That said, the two analyses each provide their own unique functions, yet both have the same goal ‒ which is to forecast the trend of the market.

The main difference between these two is that Fundamentalists (as the ones who do Fundamental Analysis are called) focus on finding the causes behind the changes in the market. While on the other hand, Technicians (the other party, which is the one you will hopefully join as per my recommendations) critically study these effects.

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The Number One Trading Strategy For Successful Traders​

There are two main types of Analysis of the markets

  • Fundamental Analysis.
  • Technical Analysis.

Traders use to chose only one of these two.

Fundamental Analysis

Fundamentalists concentrate on the studies regarding economic forces of supply and demand; those of which could cause drastic variations of prices. They utilize this analysis in order to determine the intrinsic value of the market that they are analyzing.

In essence, these analysts collect all the information they can on a specific company, such as

  • Their earnings.
  • Their economic environments.
  • Their competitors
  • Their directors, and more.

Stock Screener

Once Fundamentalists have researched all these factors, they are able to calculate the value of a company ‒ therefore deducing their trading strategy, deciding whether they should ” go long” (buy when the stock value is currently higher in the exchange) or ” go short” (sell when it is currently lower in the exchange), even if most people are under the impression that money can only be made if they buy and the value increases; yet you can also profit from market crashes exactly by ‘shorting the market ‒ this is a concept that I will explain in a later chapter of this mini course on how to trade from home successfully.

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Fundamental Analysis

  • Fundamentalists study economic forces of supply and demand.
  • They calculate the intrinsic value of a company.
  • Fundamentalists would buy securities if their value is lower than the intrinsic value calculated.
  • If the value of the company is greater than the intrinsic value calculated, then they would bet against the market by making a profit when it decreases in value.

Technical Analysis

Technicians, on the other hand, operate under the belief that the information collected by Fundamentalists is already in the charts ‒ meaning there is no need to know the commercial forces that cause a particular trend in the exchange.

The technical approach is based on three premises:

  1. Market action discounts everything.
  2. Prices move in trends.
  3. History repeats itself.

The typical technician understands that prices can fluctuate, as well as have the potential to be affected fundamentally, politically, and psychologically. What separates these analysts from their counterparts is that they believe all these emotions, and variations, are present in the charts of every price actions.

In a way, a technician also considers the fundamentals of securities, making the two market analysis techniques not seem so different after all. Technicians indirectly study what the effects of such fundamentals have in the chart, and hence, in the exchange.

Prices move in trends that are simply signified in the charts, which are representing the value in money. We are able to recognize some factors that contribute to when the market trends up or down.

Our task as technicians is to evaluate the trend, and trust me, if you spot the trend correctly, you will have more restful nights for relaxing. Unless you do day trading, setting alerts on your phone for opportunities to either enter or exit a position (meaning that you initiate or terminate an investment) ‒ would most likely “tie” you to your chair day and night, which is not the smartest way to spend one’s time. Above all, this would also be considered worse than a full-time job, yet I am sure that some readers would rather work for themselves 24/7, as opposed to having a boss; this could be its own separate topic, however.

An example of a trend can be seen with the Apple stocks in a monthly view, which shows that each vertical line (these are called candlesticks, and we will elaborate on this further) represents one month of action. From this, it can be inferred that the trend’s direction has clearly been positive.

Apple trending up

The third point I would like to make is that history repeats itself ‒ which means exactly what it sounds like. The charts tend to show that patterns repeat over time; this is due to the fact that these trends show the emotion of people towards that specific security.

Unlike events that change constantly, people remain pretty consistent with their emotions ‒ so we can observe how these feelings are reflected in the charts; it is amazing what you can see if you stick with me. I still am fascinated by how certain things happen and follow the rules that I trace from the charts.

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Technical Analysis

Technicians believe that the information collected by fundamentalists is already accessible in the charts.

Technical approach is based on three premises:

    • Market actions discount everything.
    • Prices move in trends.
    • History repeats itself.

Conclusion

To recap, I would say that I favor the technical analysis technique and am neither a follower nor an expert of the fundamental one (which means I cannot provide much personal insight for this methodology).

Although there are tools that help with Fundamental Analysis such as TradingView’s Screener; imagine how much information would be required to esteem the intrinsic value of a company, as well as the amount of experience needed to perfect this approach. I can just as easily analyze tens of markets, at the same time that a professional Fundamentalist would need to just study one.

Technical Analysis of the financial marketsDon’t get me wrong, both types of analyses can work extremely well if done correctly, yet I believe the technical option is more of an ‘immediate’ recourse, as it is easy and efficient.

There are unforeseeable circumstances that may lead to incorrect technical analyses, yet these things happen very rarely; and if ever do occur, they should simply be considered as ‘casualties’, which is why we have spoken about ‘capital preservation‘.

For instance, if the director of a particular company is caught doing something immoral, or if an issue with exporting costs occurs (which could jeopardize the profits of a company) ‒ this would usually have a big effect on trends that both the technical and fundamental analysis probably cannot spot.

If you do decide to go for the technical analysis route, I would recommend getting a certain book, which is the one I have bought and read several times:

This book covers all the basics of technical analysis and provides an introduction to more modern tools that we will discuss later.

You can find more details about this book, and others, right in this article: Top 5 Trading Books of All Time for Technical Analysis and Day Trading

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Conclusion

  • Both Technical and Fundamental Analysis could bring success to the user as long as discipline and method are applied.
  • A useful tool for both parties is TradingView.
  • Both methods are subject to unforseable events that can unexpectedly affect a particular security or a particular group of securities.
  • In this website we will use Technical Analysis as it is simpler to be learned.
Alex Promising Trader

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