Some Mistakes New Traders Make With Technical Analysis
“The best technical indicator the trained Eye.”
Many traders rely so much on technical indicators that they forget that all if the indicators are derived from price, so when you are using indicators you are adding an extra layer of analysis between you and the price.
Each technical indicator is different, each offers a different view, but the best indicator of price change is done visually, there is no delay and no distortion between price and indicators.
So, before starting using advanced indicators and strategies, consider the that every indicator added to a chart, creates a distortion layer between your eye and price and that can really hurt your judgment.
That is especially true, when just starting out and learning how to use different indicators. Best to keep it simple and start with basic visual analysis, keeping it simple.
Another mistake new traders tend to make when it comes to chart patterns and chart analysis is not considering the weekly frame along with the daily.
The more time frame used in an analysis, the more meaningful it becomes, the less frame used, the more noise a trader will have in a chart analysis. Tune out the noise.
Looking at weekly charts and you start seeing the fundamentals very clearly, and you get to see the real long term support and resistance lines, which have real meaning behind them, because they withstood a longer period of time within being taken out.
Using the weekly you notice the strength and the main trend, then to the daily and make sure that the trend is pointing in the same direction.
Then look at the intra-day charts and start mapping out my potential entry and exits.
So, start with the weekly’s and your analysis will begin changing, as you approach the daily frames.
Notably, following volume alone is not going to help a trader make money it will not tell you if a stock is tradable, If you watch the price action and time and sales tape you will be able to tell whether a stock is tradeable or not tradable.
So, 1st use your eyes and learn visual technical analysis and once you can identify patterns, then move into the technical indicators.
Some of the best traders in the world rely on their eyes only and ignore most technical indicators.
Use different time frames for analysis, do not think that just because you day trade, weekly and daily charts are not relevant or important to your trading.
This especially applies to the broad market and indexes, because stocks do tend to follow indexes about 70% of the time on average according to the data.
Day traders are technical traders, they rely on charts and price action to tell them the story.
Stay focused, it is your money and your responsibility