As more people become interested in trading in the stock market, the number of traders has increased accordingly. But this does imply that all those new traders have become successful in trading.
The primary reason for this is that these traders lack the trading skills possessed by successful traders in the stock market.
Novice traders are mainly concerned about generating more and more profits from trading.
But this is not the key to successful trading.
Along with trading psychology and trading skills, a trader should be aware of the technical analysis of stocks for making the right trading decisions.
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Let us discuss 7 Unknown factors of Technical Analysis which will help you in boosting your trading skills:
1. Always Trade with the Trend:
The saying “Trend is your best friend in trading” by Warren Buffett is the most profitable and safe way of trading in the stock market.
Trading against the trend can generate profit, but there are a lot of risks involved in it.
One should first identify whether the trend is up or down.
This can be easily identified by just drawing trend lines on the price charts as shown below:
One should usually buy the stock when the trend is up. When the trend reverses and becomes a downtrend, then it is better to start selling.
2. Using at Least Two Technical Indicators When Analyzing the Price Movements:
Not all the signals generated by the indicator are true. Some signals generated by the technical indicator can be false, too.
Thus, it is better to use technical analysis indicators from Ziggma to confirm the signals given by the others.
One should also not use too many technical indicators, as it may lead to confusion. One should try to limit to just 2-3 technical indicators.
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3. Using Multi Time Frame Charts for Confirmation:
The rule is that signals are more reliable given the longer time frame charts.
If the trader is a short-term trader, then he should look at the charts of daily, hourly, and 15 charts and then accordingly make a trading decision.
Similarly, for a long-term trader, he should look at the weekly, monthly, and yearly charts and then make a trading decision accordingly.
4. Never Reverse Your Trading Plan:
A trader should always stick to their trading plan.
Not every trade you take up may generate profit only. Some trades may also generate losses.
Make a trading plan that can compensate for those losses. Examine those losses and try to avoid them in the future.
Make a track record and examine in which trades you are making losses and in which trades you are generating profits.
This way can help you in reducing your losses and generating more profits.
5. Always Put a Stop-loss and Price Target for Every Trade:
Most traders consider trading as a game of gambling, but it is not taken seriously. It is a method of building capital.
One can reduce losses from the trade by putting a stop to losses in their trade, depending on the losses that they can take.
Also, don’t be greedy when your trade is generating profits. Book your profit at the profit target set by you.
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6. Do Your Research:
Just don’t rely on the advice and stock recommendations given by market experts, news channels, business newspapers, etc.
Before taking their advice, do your research, as every trader has their way of trading.
Thus, firstly, do your research and then make a trading decision.
7. Develop a Trading Setup:
Develop your trading setup and choose your indicators wisely.
There are many indicators available nowadays, but not all of them do not serve the same purpose. Choose those indicators that serve your purpose the best.
It is better to develop a trading setup that has a combination of both leading and lagging indicators. Leading indicators are those that predict future reversals, whereas lagging indicators are those that confirm the reversal that has already taken place.
Thus, develop a trading setup and also backtest it if possible. You can also take the help of experts who will help you in developing your trading setup.
They can help you in choosing the best technical indicators for making trading decisions.
One should note that before boosting your technical skills, you should have good knowledge of technical analysis. Learn about the different technical indicators and charts that will help you in analyzing the price movement and also help you in making trading decisions.
One should also remember that you cannot become an expert in a day. It takes a lot of discipline and dedication to be successful in the stock market.
One should also not trade in the stock market for entertainment; it is a serious business of building your capital.
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