Knowing just the basics of technical analysis won’t help you in becoming a successful trader in the stock market, unless you start analyzing the charts with technical indicators, and price patterns.
But before doing that, there are certain facts which you will have to keep in mind while doing technical analysis.
In this video, we will be discussing some points which you should keep in mind while analyzing the charts with technical indicators and tools:
First is the Trade setup.
Before starting trading in the stock market, it is important to make your own trading strategy or trade setup.
Develop a trading strategy using the technical indicators and patterns which you understand, and you are comfortable trading with them.
Next is the Stop loss.
Try to put a stop loss in every trade, as this will help you in minimizing your losses. You can put a stop loss at the low point of the previous day’s candlestick, or according to your risk appetite.
If you are a new trader, then you can put a stricter stop loss, till your comfort level is reached. You can also take the help of indicators for deciding the stop loss price for your trades.
Next is the Risk- Reward Ratio.
Remember to always put a risk-reward target before placing your order. This will help you to stick with your trading plan.
The next thing you should keep in mind is to trade with the trend.
Always remember, \”Trend is your best friend\” while trading in the stock market with technical analysis.
Novice traders should specially trade with the trend, as it will help to reduce their losses and also understand the price movements in the market better.
When the prices are moving in the upward direction, one should take a buy position in the stock. When the trend starts reversing from an uptrend to a downtrend, it is better to exit the stock.
Similarly, when the prices are in the downtrend, one should take a sell position, and when the trend starts reversing from downtrend to uptrend, exit the stock.
This technique of trading will help you in reducing the risk as well as increasing your profits.
Next, Use multiple indicators.
There are many technical indicators that one uses while trading. Using any one indicator in isolation can be mis-guiding, and also, using too many indicators will not help you come to a decision. So, use a combination of indicators which helps you to reasonably analyze the market and helps you take a decision.
It is up to you, to use the indicator of your choice and comfort, depending on the trade horizon and your comfort in interpreting the underlying logic of the indicators.
Next is, buy low and sell high.
While doing technical analysis, one should note the levels of resistance and support.
If the stock reverses from the support level, then one should buy, and then sell until it has reached the resistance level.
Next, do not overtrade.
Remember that trading in the stock market is not a game of gambling. When you are not able to find a trade with your trading strategy, then it is best not to trade and just wait for the right opportunity.
If not, then this trade will ultimately end up in making losses.
Next, is the proper position size.
Decide the position size before placing your order, which depends on your money management skills and risk appetite.
Next, Stick to your trading plan.
It is very important to stick to your trading strategy and setup while trading. Don’t let emotional biases come between your trading strategies.
Lastly, remember to learn from your losses.
Always learn from your losses. See where you have gone wrong while analyzing the charts, and then correct it. This will help you in improving your technical skills as well as reducing losses.
Remember that becoming a pro in any field requires patience and dedication. Similarly, becoming a pro in analyzing the charts by using technical analysis also requires patience, and many years of analyzing the charts. The successful technical traders in the stock market also didn\’t become successful in one day.
So, keep analyzing the charts and keep upgrading your technical skills by learning from your mistakes.
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