Type ‘Learn to trade the markets’ into a search engine and, at time of writing, you’re going to get back more than 389 million results. With this huge bank of advice, some conflicting, some worthless; it’s no wonder that so many people quickly give up on their attempt to learn how to trade, suffering from a bad case of information overload.
At the beginning, all too often, we have to focus our time with new students addressing bad habits and correcting half-baked strategies picked up from across the web; when you’re trading with your hard-earned savings this misinformation can easily lead to you making very costly mistakes.
Know Your Limits
So what are the Key Ingredients for trading success? In our experience it’s:
– A quality and scalable education
– A established community of teachers and peers for accountability
– A coherent training programme designed by expert and accredited traders
However, another thing critical to your success, particularly when starting out, is to be keenly aware of your limitations. No matter how tried and tested the course is; no matter how insightful or in-depth; if you try to rush through the material or skip to the end you’ll quickly be overwhelmed and start muddling teachings together or try to apply a consistently successful strategy on one market to another that behaves completely differently. That’s why all educational courses are set out over months and years; modules need to be learned and then given time to integrate into your actions until they are practically second nature.
Different Types Of Trading Analysis
Fundamentally there are 3 types of trading analysis available to you; these being 1) Technical Analysis, 2) Analysis of Fundamentals & 3) Analysis of Sentiments.
Technical analysis is a discipline used to identify trading opportunities by analyzing statistical trends gathered from trading activity over a given timeframe, such as price movement and volume. Technical Analysis can be used on virtually any market; whether that’s Forex, commodities, futures – anything that the historic data on price patterns or stock trends is available for.
Analysis of Fundamentals casts a narrower net and attempts to evaluate an individual stock’s value based on the business’s published results, such as sales and earnings, but also by tracking events in the wider industry through the news. Performing fundamental analysis can be challenging (and time consuming) especially for a beginner because it requires digging through years’ of financial statements to know when the stock price is wrong.
Analysis of Sentiments is primarily looking at confidence in the markets and the feelings of traders. This discipline is important in defining whether the market is bearish (prices going down) or bullish (prices heading up) and involves the use of indicators to help gauge your next trading position. Contrarian investors for instance will be on the look out for crowds to either buy or sell a specific asset, say a currency pair, before taking a position that runs counter to that sentiment.
But Which Is Better?
This is the natural and most common question we get asked when talking about these types of analyses but the answer, like most things in life, is complicated.
Whilst Fundamental Analysis looks to company records and the media to judge a stock’s intrinsic value and Sentiment Analysis looks to judge the mood of a market overall, Technical Analysis means reading charts to determine your trade position. At Trading College, many of our faculty specialise as Technical Analysts; as such they are ‘trading what’s in front of them’, looking at price action on their charts to base their buying and selling decisions upon.
Whilst each of the 3 analyses have their merits and are no doubt useful in certain situations, it is in its versatility that Technical Analysis’s strengths really become apparent and it’s the principal reason why this discipline is so prevalent in commodities and forex markets, where traders focus on short-term price movements, both up and down, to generate their profits.
Why Mastering Technical Analysis Is So Important
Technical Analysts do not listen to the rumour mill or the spin of the newsroom but believe that the truly critical information is reflected as movements within the charts. Price trends, management of entry and exit points, break outs, divergence and identifying trading patterns are what Technical Analysis is all about. Trading College’s own signature software, the Pro-Trading System, displays various charts tracking all of this data and gives out signals and alerts so that students can make their decisions accordingly.
With interest rates having flatlined to record depths, the uncertainty of a No Deal Brexit looming around the corner and the devastating impact the global pandemic has had upon the national economy, it’s no wonder why we’re seeing a sharp interest in those wanting to take their financial future into their own hands and start learning how to trade the markets. Whether that’s to top up their declining income or to have a more flexible schedule to work around their family’s needs or just to stop their savings from being nibbled away by inflation.
It has been reported that retail traders, ordinary people like you and me, now make up nearly 25% of the stock market following COVID-driven volatility. 2020 has certainly been a volatile year for the markets, and whilst we all feel the impact of these dramatic moments where everything seems to hang in the balance, when the dust has settled it is mostly traders who will profit from these market moves– so long as they have put their money on the correct side of it. How successfully a trader can do this is where the correct education and software come in.
Learn to Trade Online
If you’re looking to start learning how to trade with technical analysis then we wholeheartedly recommend that you sign up for our next Learn To Trade Online introductory mini-course. It’s totally FREE and is an excellent introduction to the basics of this highly complicated subject. We look forward to seeing you there!
At Trading College we believe in a systematic and discretionary approach. We cater to both kinds of traders with our strategies that can be mixed to create great trading results. In this article, we will have a look at the pros and cons of both trading styles and...
What is Risk vs Reward in Financial Trading? Risk to reward is the relationship between the amount you are willing to risk on a trade and the amount of profit you hope to make. It is a gauge of the potential profit (reward) of a trade compared to the potential loss...
WHAT IS SWING TRADING? Swing trading is one of the most popular forms of actively trading the markets; particularly amongst traders using technical analysis. Unlike the intraday trades placed when you Day Trade, Swing Trading is a trading style that tries to make...