PAD: We’ve all made a lot of money in the last five years in stocks on my own just buying on the fundamentals. Why would I need the help of technical analysis now?
SO: That’s great, but what if you can do better?
As an investor myself, the biggest enjoyment I’ve found over the years is that the learning process never ends.
Just when you think you’ve got it all figured out, something comes along to challenge that mindset.
If you’ve been riding the current bull market, you probably think you’ve got a lot figured out. There will a come a time when that’s challenged.
For me it’s a bit different. Let’s say your winning percentage is 70% on all your trades.
That seems good and it’s more than enough to build a fortune over time.
However, I constantly ask myself, how much time and effort did it take to get there in the first place? How can you do better? How many trades did you perform throughout the year? Are you seeing many small gains or large ones? What can you do better?
At the end of the day there’s little incentive to become complacent in the marketplace ever.
But today, after a six year run up in stocks, you complacency will cost you.
Technical analysis provides timely and invaluable entry and exit points. It keeps your wins big, losses small, and, most importantly, anything but complacent about the markets.
PAD: There are clearly a lot of benefits to technical analysis. Are there any free sources out there you would recommend to our readers to get started using technical analysis?
SO: There are a lot and there aren’t many at the same time.
In the past I remember Bigcharts.com and Stockcharts.com being the two main free resources for investors to create and use basic charts.
But limited functionality and lack of upgrades to their sites over the past 10 years left technical analysts wanting more.
Then Freestockcharts.com came along.
It’s a complimentary service which allows you to create and save tabs of all the equities and indices you follow.
Investors can plot just about every technical indicator in existence. And I make frequent use of their annotation tools. They’re so simple and easy to use.
If I draw the wave patterns created by Elliott which we talked about yesterday or support/resistance points on a stock chart, that work will be saved the next time I log into my account.
The real problem with these sites is they don’t help much at all with teaching how to do technical analysis properly. They’re primarily for executing technical analysis.
PAD: Is there a book then to learn about it? Or some other source where I can get started using technical analysis?
SO: Thomas Bulkowski’s Encyclopedia of Chart Patterns is an excellent resource.
If you’re looking to learn the basics of technical analysis or just want to refresh your memory on certain patterns and how to play them, this is a great resource.
The book also reviews the historical reliability of a number of different technical indicators.
This data will help you identify breakouts, breakdowns and all sorts of other of the most highly predictive patterns.
PAD: What would you advise someone who is new to technical analysis and wants to learn?
SO: Again, read as much as you can on technical analysis to form a solid understanding of topics like indicators, candlestick charting, pattern recognition, Elliott wave, etc.
After a while things begin to sink in. Then you can apply the principles you’ve learned.
Either start small or just paper trade until your experience grows to a point where you trust the indicators and feel comfortable throwing real money into trades. (I feel like I read this in Part I)
That’s all why I created the Oakes Momentum Report.
There are so very few good resources on technical analysis out there. Most are bad or worse.
Through this service, you’ll also have a trained, experienced, and steady hand to guide you through the analysis, provides solid recommendations, and regular follow-up.
PAD: Is Oakes Momentum Report like those CD sets on the late night infomercials that promise instant riches?
SO: No, this isn’t some get rich quick scheme or system built on fluff.
It’s a legitimate tool analysts use to analyze market momentum, trend and psychology, etc.
As we talked about before, fundamental analysis focuses more on proper equity valuation in an attempt to find value where it is not yet priced in. Only problem is that you can literally hold on to a stock for five years before seeing a return on your investment.
I don’t know about you, but I’m not in the market to waste precious time.
Technical analysis seeks to determine when a stock or index will change course and how long that price run is likely to last.
Technical analysis is not about stories, growth, and headline excitement.
To be blunt, it’s purely about making money in stocks.
That’s all technical analysis does and it’s all we do in the Oakes Momentum Report.