Charting Wealth, The Book, Chapter 2, Learn Stock Chart Trading with Charting Wealth
Empower your investing by learning to read stock charts.
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Chapter 2, Introduction to Charting
People entertain themselves in a myriad of ways: sports, hobbies, television, movies, drinking, exercising, etc. Why not entertain yourself with the stock market? It is absolutely fascinating avocation.
The market has every thing: danger, greed, fear, excitement, riches and poverty, plus it is available to everyone. Even if you have zero money right now, you can open a virtual trading account at any online broker, set up your platform, fund yourself with 1 million virtual dollars and, boom, you are a virtual millionaire and potential stock market guru.
Once you do become a virtual millionaire, how do you grow your empire? How do you become a virtual multimillionaire or even billionaire? You must learn to read a stock chart.
Oh, we can hear the naysayers right now: “I am a value investor, not a gambler.” Everyone should be a value investor. If you want to gamble, you were reading the wrong book. You need to learn to count cards, read tells or learn the probabilities of varies hands in five card stud. When it comes to the stock market and the value of a company, no one should be willing to buy low and sell high.
The charts show you highs and lows, momentum and price movement, the up and down movement of various equities and the market itself. Yes, it is great to buy undervalued companies, but you always want to buy at the right price. Buying at just any Price is foolish. The stock market is open every trading day and you can buy and sell stocks, ETFs or options at any time. The key, the secret, the solution, the path, the smart money buys at the right price.
This book will give you simple, key insights as to how to read a stock chart and have an educated estimate on where the price for a particular equity or the market itself is headed. Do we offer a guarantee? No, nothing is guaranteed but death, taxes and the salvation offered by Jesus Christ. However, billions have been made by men and women who have learned to read a stock chart and what to do with the information gleaned. Billions, likewise, have been lost by fools who heard a tip from a guy, a friend, an expert, a media personality, etc. and lost their asses.
What does it take to learn to read a chart and apply the lessons? A small bit of time, commitment, patience and a computer. In today’s world, any person on the planet with an internet connection and a computer or smart phone can learn to become a killer investor or trader.
Here’s a quick aside: an investor is someone looking to earn money on savings to spend later. A trader is someone who has shorter term goals, and is willing to take a greater risks for a faster and higher returns than an investor. The rules for reading a stock chart are the same for investors and traders.
Let’s talk briefly about stock charts. Charts are nothing more symbols, graphical representation of price movement, and indicators which are mathematical formulas depicting particular information from the price movements. By looking at the price movements and indicators, we can see how stocks have behaved in the past. We use this information like a road map to predict, as accurately as possible, how price movement will react in the future.
We live in a wonderful age where the information at our fingertips is far beyond anything investors or traders could imagine just a couple of decades ago. To have any chance to make money in the past, you had to be a Wall Street insider. Why? The lag time between critical information and the ability for the average person to act on that information was rarely possible.
Today, anyone can instantly purchase or sell a stock, ETF or option at the blink of an eye, all while receiving constant updates on the market, price movement and the latest news. Yes, Wall Street insiders still have some advantages, but the playing field is much more level.
Now, the difficulty is sorting through all the information. Many times too much information is available. “Analysis paralysis” can be the problem. So much technical information is thrown at any investor or trader that she can become overwhelmed.
There are dozens of indicators available for analyzing any trade, purchase or sale of an equity. Add to this situation the various theories about investing, many of which are contrary to each other, add to this the financial news from every source of media: television, radio, print and the Internet. The result is that the average investor is easily overwhelmed with too much information.
In the past, investors had to guess what was actually going on in the marketplace. Now, they are forced to drink from a high-pressure fire hose of information. With our charting method, we apply Occam’s Razor whenever possible to solve the situation of information overload. William of Ockham was a Franciscan Friar and a Logician in the 14th century England. He developed a simple principle based upon Aristotle’s belief that “nature operated in the shortest way possible.”
Let’s move onto chapter 3!
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At ChartingWealth.com, every day the market is open, we chart the S&P 500, the NASDAQ 100 (tech stocks), 20-Year Bonds and Gold. In just a few short minutes, we give you a valuable training update and quickly review the trends we see taking place in the market. At the end of every week, we give you an overview of what happened over the last five days and what’s on the calendar for the next trading week.
With our stock chart training we focus on developing our skills in technical analysis. This activity is the forecasting of future financial price movements based on an examination of past price movements. Like forecasting the weather, technical analysis does not result in absolute predictions of the future. Instead, we try to anticipate what is “likely” to happen to prices over time. Technical analysis can use a wide variety of charting time periods and indicators that show price movements over time.
Since our objective with stock chart training is to predict future prices, it makes sense to focus on price movements. Price movements usually precede fundamental developments. By focusing on price action, technicians are automatically focusing on the future.
The market is a leading indicator and generally leads the economy by 6 to 9 months. To keep pace with the market, it makes sense to look directly at the price movements. More often than not, change is a subtle beast. Even though the market is prone to sudden knee-jerk reactions, hints usually develop before significant moves. We see the hints in our charts.
Our simple stock chart training, reviews and analysis can help identify support and resistance levels. These levels are usually marked by periods of congestion within the trading range where prices move within a confined area for an extended period of time. This limited movement tells us that the forces of supply and demand are deadlocked. When prices move out of the trading range, it signals that either supply or demand has the upper hand. If prices move above the upper band of the trading range, demand is winning. If prices move below the lower band, supply is winning.
Technical analysts view the market to be 80 percent psychological and 20 percent logical. Fundamental analysts consider the market to be just the opposite – 20 percent psychological and 80 percent logical. Psychological or logical is open for debate, but there is no questioning the current price of a stock, index, commodity, ETF or option.
Price is available for all to see and no one can doubt its legitimacy. The price is set by the market and it reflects the sum knowledge of all participants. These participants have considered and discounted all available information and settled on a price to buy or sell. The price shows the forces of supply and demand at work. By examining price action to determine which force is prevailing, technical analysis focuses directly on the bottom line: What is the price? Where has it been? Where is it going?
Even though there are some universal principles and rules that can be applied to stock chart training, it must be remembered that technical analysis is more an art form than a science. As an art form, it is subject to interpretation, but it is flexible in its approach. Each investor should use only the techniques that suit his/her style. Developing a style takes time, effort and dedication. The best news of all is the rewards can be significant.
We post timeless knowledge, along with our daily stock chart training and reviews to educate and empower you to become a fearless and accomplished investor!
We standby the proverb, taken from Confucius, the Chinese master of wisdom: “Study the past, if you would divine the future.”
What is the cost to you? PRICELESS.
DISCLAIMER: We offer NO advice and make NO claims to expertise of any kind. This site is dedicated to knowledge and education through our stock chart training, reviews and other information — nothing more.