How to Become a Better Stock Trader

Do you trade stocks, options or forex?

What method have you found success in?

There are many different principles when it comes to investing in stocks.

Whether scalping, day trading, swing trading or long-term trading, you must have a strategy.

There isn’t just a need to understand fundamental analysis.

You also need to understand technical analysis.

• You can see more on learning fundamentals in stock investing in Use This Checklist When Choosing Stocks to Buy

Today, we will review a few techniques that could be helpful.

Let’s get started.

Using Indicators

After you’ve reviewed the fundamentals of a company, if you’ll be trading, its time to use a few techniques of technical analysis.

Indicators are tools that can be used to gain better insight on whether the current sales price of the stock, option or currency is cheap or expensive.

• Price Per Earnings Ratio (PE) – Knowing the stock’s current price per earnings ratio compared to it’s competitors, in addition to the stocks PE history, can be very helpful in understanding if the stock is currently cheap or expensive.
• Volume Difference – The current trading volume compared to the average trading volume is a key indicator. My preference is to find stocks trading at twice the average volume or more.
• Average Trading Range (ATR) – Knowing the range in price variation each day can help you to gage your profit capability.
• Relative Strength Index (RSI) – The RSI can help you indicate where the current price is based upon being over-bought, over-sold or somewhere in between. This can be used for insight on when to enter or exit a position.
• Simple Moving Average (SMA) – The simple moving averages are key indicators that can help you identify reversals and trends.
• Support & Resistance Levels – Identifying points of support and resistance allow you to identify trends and patterns. Identifying these levels can help you understand why a reversal may happen and when a continuation of momentum holds more value.
• Chart Patterns – Chart patterns allow you to better understand potential future behavior of the stock’s price.
  • See Learn Methods of How to Evaluate Stocks to Buy to help you identify chart patterns.
• Candlestick Patterns – Understanding candlestick patterns can help you better understand potential reversals and continuations of a trend.

Conclusion

These could be the indicators you can implement into your trading strategy.

• If you use more than what is indicated here, comment what you’ve found success in.

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More knowledge brings more confidence, and more confidence brings growth.

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Comment what indicators or strategies you’ve found success in.