Editor's Note: As you know, reading stock charts is a HUGE part of what we do here at Monument Traders Alliance. Today, we're sharing a guest article from a chart-reading extraordinaire: The Oxford Club's Chief Income Strategist Marc Lichtenfeld. Marc is one of the most knowledgeable experts in our industry when it comes to reading and interpreting stock charts. In today's article, he's telling you the story of how he learned to integrate technical analysis into his trading. Luckily, your journey into technical analysis won't involve any weekends at the library or college-level classes like Marc's did. That's because he's just introduced a brand-new trading indicator to his readers, and it's been so popular that he's put together an educational video to teach others how to use it. Go here to watch Marc's new video on the "One-Look Chart." - Ryan Fitzwater, Publisher Marc Lichtenfeld, Chief Income Strategist, The Oxford Club The letters and numbers were flying past me as traders shouted at me to execute their orders. How were these guys making sense of the seemingly random price action coming across their screens? I was a newly minted assistant on the trading desk, and my job was to watch the markets, execute trades on behalf of traders and alert them to any trends that I saw. The first two tasks were no problem. But I had a tough time seeing how those moving prices on my screen could be interpreted and lead to a decision to buy or sell stock. I'd love to tell you that after a bit of studying and hard work, I picked it up pretty easily. But I'd be lying. A year later, I was as clueless as I was on my first morning. And then one day, a trader showed up on the desk with a new data source. And when he hit "3" on the keyboard, the stock's chart came up. He quickly toggled between a daily chart, an hourly chart and a five-minute chart. I was enthralled. I peppered him with questions: "What does that mean? How do you know when to buy or sell?" Without looking up from his charts, he snapped, "Go learn some technical analysis and then come back to me." Technical analysis? I had no idea what he was talking about. There was no Google back then. So I spent that weekend at the library devouring everything I could find on technical analysis - the study of stock charts (or charts of other financial instruments). I enrolled in a class on technical analysis at a local university, and I was hooked. All those random numbers I saw on my screens could be used to create a chart that would show patterns, trends and even price targets. Importantly, I learned that these charts are visual representations of human emotion - greed and fear. And those emotions repeat in patterns and are somewhat predictable. I became obsessed with improving my skills. I was fortunate that I had access to some of the most legendary technical analysts in the world. It was like discovering a love of baseball and speaking to Babe Ruth, Ted Williams and Hank Aaron every week. At first, I thought I'd found a crystal ball that would lead me to riches. But what these legends taught me, and what my hours and hours of study showed me, is that charts are not foolproof. But what they are very good at is revealing patterns and helping traders find the points of maximum reward and minimum risk. |
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