pftq's Stocks and Investing

Trading Guide

Tech Trader


Virtual Trading System

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July 23rd, 2011
Posted by pftq | #

1. Introduction

     The style of trading I use is what most people call Swing Trading (buying/selling same stock in a week) or Day Trading (buy and sell in a few days).  The method I use for reading a stock is primarily Technical Analysis, but what I look for more than anything else in a stock is trying to understand what other market participants are thinking based on price and volume.

     A lot of people who use mainly Fundamental Analysis for reading a stock will tend to say that Technical Analysis is illegitimate and those who use mainly Technical Analysis would say the same vice versa.  In my opinion, both are valid depending on the timespan you are looking at.  Fundamental Analysis, which is comprised of actually looking at the company structure/data, will tell you how a stock does in several years or more.  Technical Analysis, which is comprised of looking at how much of a stock is being bought/sold, will tell you how a stock will do in the coming year, month, week, or even the next few days - depending the time frame you look at.

     Clearly, fundamentals ought to be what drives a stock, but if no one cares for the company or what it's doing, the price will not move accordingly.  Likewise, if the company becomes very popular and "hyped", people may storm to buy a stock regardless of its fundamentals.  Despite what a stock ought to represent, you have to remember that it is people who set the prices.  In a sense, what you're trying to do is read the "people" who buy/sell the stocks, since they are the ones who ultimately determine the price.

     The guide I am writing here mainly reflects what has worked for me in my own experiences.  My expanations may not always formally correct, but the idea or perspective on stocks is what I consider the easiest way to picture it when I do my own trading.  If you are already set on one trading style above all (or worse yet, already know how to trade), you'd best move on as there will not be anything useful here for you.  The target audiences I originally wrote this for were friends whom I was teaching to trade for the first time, but I decided to make it available to anyone who just wants to learn as well.
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