Are you new to the technical analysis world? Or someone on a mission of analyzing their Oxford Biomedica share price? Regardless of your mission, surely you’re looking for helpful strategies for your technical analysis.
We have a list of useful strategies and informative technical analysis insight to share with you. Keep reading!
Technical Analysis- What it is
Investors love to analyze their stocks from time to time, using certain fundamentals. These include industry trends, valuation of their revenue. But what usually happens is that the market price often clouds the fundamental factors.
To analyze the market price, one has to examine historical data, in terms of volume and price. This requires strategic approaches and a lot of digging but if you have the right approach, you will surely draw up the correct analysis.
Technical analysis is typically a part of trading. People use this method to predict where the market prices are heading, the strength of market trends etc. Researchers have to rely a lot on previous market prices to draw up results to these searches.
In technical analysis, you have to focus on charts and various technical indicators if you wish to forecast the market. For beginners, we have some sound strategies for you below. But before we launch into those, let’s look at the fundamental principles of technical analysis:
- There’s always a trend that directs the market. Also, it takes markets time to reach where they’re headed.
- Nothing discounts everything at once like market price does. So, if the market is trading something at a particular price right now, that is the fair market price. Also, the market price factors in all the fears, expectations and hopes revolving in the market.
- Technical analysis relies heavily upon past price history. Hence, it proves that history does repeat itself in this landscape so the prices that were vital back then are vital even now.
Now, let’s look at the technical analysis strategies beginners can use.
1. Identify the Strongest Trends
Beginners must first try to identify the strongest trends in the market. Strong trends are those that have maintained a vigorous pattern upwards. You may use technical indicators for this but an even better choice is the price action.
You can always verify the accuracy of price action approach with hedge fund managers. They will second that it’s the best approach, especially the 20-day high rule. If a trend has sustained an upwards motion for twenty straight days in the market, you can circle that as a strong trend.
2. Choose Your Strategy or Build Your Trading System
Start by building your trading system or identifying your foolproof strategy. Let’s give you an example:
Say we have a novice trader who has picked a crossover strategy to follow. In this, he plans to track two averages on the move for a 50-day and 200-day stock price movement. Now if the moving average of the 50-day short-terms exceeds the long-term moving average of the 200-day, then there’s a rising price trend.
This upward curve gives birth to a buy-signal and if there is a downward trend, it will create a sell-signal.
3. Identify Pullback (4-DAY)
In the first strategy, we discussed identifying a strong trend. The other part of it is also to learn to identify a pullback, usually a 4-day one. This is an essential strategy, even for beginners in this field because it helps you spot your entry opportunities before the market can get back to its prevailing trend.
There’s something known as the four-candle hammer strategy, which you can use with price for spotting retracement. For this strategy, you have to look out for four consecutive retracement days in a go post the 20-day high.
4. Trade Tracking and Surveillance
Once you enter the world of trading, you will encounter a range of functionality levels at play. The fact is that traders employ several levels to suit their strategy. You will perhaps see a margin account serving the day traders and providing them access to market maker visibility and level II quotes.
Others may want a lower-cost option and may thus be operating with a basic account.
5. Identify Securities
You must realize that all the securities and stocks do not align with all kinds of strategies here. While some may be ideal for volatile or liquid stocks, others may be more suitable for stable or illiquid stocks. Hence, for every different choice of contracts or stocks, there have to be different choices of parameters.
6. Adopt an Empirical Approach
In technical analysis, you can’t rely on wishful thinking or allow confirmation bias mess with your vision. You need to pay careful attention to the chart and accept hard evidence. This is why it is imperative to take every fact on the chart into consideration. If you miss anything, don’t fail to refer to it again.
7. Use Two Indicators
If you’re using indicators for your strategy, don’t rely on just one. Use at least two technical ones. Once you find the market downturns with one indicator, apply a second one for a confirmation effect. This double verification will help strengthen your odds of being right.
8. Pay Close Attention to People Warning You
You will come across many people who will try to enforce the belief upon you that market timings don’t work. Instead of brushing them off, it’s best to pay heed to them. Do you know why? It is because they’re the people who failed to make technical analysis work for them.
In fact, you’ll find it quite surprising that often the crowd warning you of off-marketing timings is the massively successful and well-reputed pundits and managers. Also, their warning will prove to you that the bigger giants of this industry used technical analysis for their approach. Hence, you must adopt it too.
Only, it is wise to pay attention to what they warn you about concerning the timing. Note down their advices and bear those in mind when constructing your technical analysis strategy.
Final Thoughts
The technical analysis process initially seems daunting and overwhelming but you must not let it consume you. Instead, pay close attention to charts and trading signals and acknowledge that technical analysis is your window to market psychology.
If you wish to earn a decent profit and continue increasing it, you will have to ace your market psychology readings. For that, nothing can be a better approach than technical analysis.
