How to Trade Stocks and Invest in the Stock Market Part 2
How to Trade Stocks and Invest in the Stock Market
“Trent, the market does not care what I think.”
That was my son, Eli’s response to me asking for his opinion on why the stock market is rising during a worldwide pandemic.
He is correct, and I knew that.
So why did I ask that question?
Many of us are fascinated with stories and the stock market, so we watch financial television and read analysis reports seeking out opinions and explanations for price movement.
Eli reminded me that our evaluation of stock market fundamentals, a news release, or government policy’s economic implications do not matter and are not necessary to trade or invest successfully.
The news with the pundits with their interpretation of why stocks or markets move are only noise, a distraction, and have little impact on our ability to make money in the stock market.
What does matter, however, is the price. To quote Brian Shannon, “Only Price Pays”.
For someone with an economics background, this was difficult for me to understand.
However, I did realize that no person or group has access to all the current information, nor did I have the time or the ability to process the necessary information required to evaluate a stock or a market.
So, how do you trade or invest stocks without attempting to process the fundamentals?
Eli introduced me to Technical Analysis, defined on Investopedia, as a trading discipline employed to evaluate investments and identify trading opportunities by analyzing statistical trends gathered from trading activity, such as price movement and volume.
Technical Analysis is based on one major assumption, freely traded market prices travel in trends.
Once I began to identify trends using Technical Analysis, I turned off the news and quit seeking out other’s opinions on a stock or a market.
Turning off the news has been a great experience while freeing the mind of the world’s happenings. I encourage you to try it.
Last week, I discussed the different types of traders and the associated timeframes. Next week we will begin to discuss methods for trend identification for each trader and timeframe.
In future articles, I will discuss the following that will provide you with the knowledge to manage your investments:
The terminology used in the market place used in future articles;
Understanding market structure and how all markets (stocks, bonds, commodities, foreign exchange and cryptocurrencies) behave the same way;
How I identify trades for investments using Technical Analysis;
Risk management strategies that I use;
What I believe is the Holy Grail of trading and investing (it is not what you think);
Several winning and losing trades demonstrating entries and exits.
I enjoy discussing the markets, whether they are currencies, equities, commodities, or bonds.
I am fascinated with price action, so basically anything with a chart.
Let’s have a conversation, and we can explore a new perspective of the markets that you can apply to your analysis.
Life is Good
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