Most mutual funds rely on fundamentals to pick their stocks. There are also traders who trade based on order size and volume; they are sometimes referred to as market makers or brokers. These traders work at the trading exchange, providing liquidity in the market.
They trade with any other trader (like you or me) and make their profits based on the spreads they earn from the traders on the other side of a transaction. Finally, there are technical traders. This is the type of trading that I think is most valid for traders, especially those who are trading small accounts, but this skill is rarely discussed until now. Technical traders will use chart patterns to find trades.
They use interpretations of levels of support and resistance to develop their trading assumption. Techni cal analysis, as with any other form of analysis, can get very complicated quickly, but it doesn’t have to. This book will discuss how to read charts using technical analysis in a practical way.
This type of analysis keeps my opinions grounded in what is happening in the markets at the time and has served me well. Every trader believes that her method of analysis is the best and most informative; it is, after all, the information on which that trader is relying to make money.
I believe there is a role for each of these types of analysis, but it’s important to realize that each type of analysis will be best for different types of trading, for different markets, for different account sizes, and for different trading goals.
If a trader tries to apply the analysis from another trader without understanding the parameters around that trader’s trading assumption, the outcomes may not be favorable. It can be a dangerous proposition to make trading or investing decisions based on what these experts have shared, especially if they are referring to trading assumptions based on an account size and trading goals that are different from your own.
What might be good for one trader, based on his trading plan, may be devastating to another trader, based on her trading plan. Luckily, there are many styles of trading, which means that there is one that should match your personality and goals. The key to trading is that that you need to find a style of trading, a trading instrument, and trading setup that match your risk parameters.
