Stock Trading Technical Analysis - Made Easy!

Everybody talks about technical analysis but very few people actually understand it. Lucky for you I am one of those people. Now if images of math degrees and computer models come to mind then those Wall Street guys have done a good job at scaring you away from something that’s actually quite simple and logical. Technical analysis simply ignores the fundamentals like earnings and book value and focuses on the short term supply and demand for a given stock. Is it undervalued? Who cares; if no body’s buying its going down. Is it overvalued? Well not if everybody and their brother wants a piece of it right.

Today we are going to look at three technical called MACD, VOLUME, and STOCHASTIC. Sounds scary? Well they’re not and they may help you decide whether or not to make a short term trade. Now there is a saying among tech groups “The Trend is Your Friend”, and MACD is nothing more than the use of two moving averages to identify a trend.

One is an average over a longer period than the other. If one of the moving averages crosses the other it can signal a change in momentum of the stock price. For example here’s a stock on a down trend. Now you’re wondering whether steal, but you’re afraid it may continue plummeting. You don’t want to catch a falling knife. Here’s how you know when a stock has hit bottom. You’ll see the shorter average at crossover and move above the longer average, that’s a bullish indicator. Now you will also notice a zero line, if a MACD goes above zero and crosses over that’s an even stronger bullish indicator.

Now as much as I love MACD, that’s just one part of the story. Volume is the second thing that you want to look at. Ancient technical knowledge goes by these principles. Stocks going down on relatively heavy volume are not good buys, while stocks going up in heavy volume are. Stocks going up on weak volume maybe false indicators think about it. If you go to Amazone.com and one five start book has over one thousand positive reviews and another has only ten, which would you trust?

Finally let’s look at the STOCHASTIC indicator. STOCHASTIC is just a fancy way of saying whether a stock is overbought, which Is above 80 on the chart or oversold which is below 20 on the chart. It only works if a stock is in a range, so it’s a great tool to use to evaluate a bottom. If the STOCHASTICs is in the oversold range that’s a solid short term indicator for a buy.

And that’s it, now you’re equipped with three widely used technical indicators

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