Don't think I forgot about my poll from the other day!

Seems like you guys are interested in a crash course on technical analysis (TA)!

Here's my Introduction to Technical Analysis!

Lets get into it below!

[MEGA THREAD]

TA is more of strategy used by day/swing traders who speculate where a stock will move. To keep it simple I won't be bringing up how to short. New traders should focus on going long before anything else.

I also believe in keeping it simple when trading stocks...

New traders like to have a box full of tools when you really don't need much.

Starting it off you should ALWAYS start by looking at daily chart when charting. Not a 1/5/15 min chart. You want to buy a stock based off a big level (on the daily) not off the smaller timeframes.

You also want to identify both support & resistance levels.

Put simply:

Support acts a level (price) where the stock struggles to fall below. Resistance acts as a level where the stock struggles to rise above.

Think of S&R as a box the stock is stuck in. The longer it is in this box pushing the edges, the stronger it will breakout.

You must also learn to identify the trend the stock is in. The trend is your friend, don't fight it. The market can be irrational longer than you liquid.

Use trendlines to determine the stock's health. You can find chart patterns through this. We'll go over these shortly.

Next up is volume. Volume essentially shows liquidity. I recommend to trade stocks that have over 350k volume/day. This way you don't get stuck when selling.

Volume paired with S&R is a great combo. When a stock is consolidating, you want to see the volume in the stock decrease. This indicates that buying/selling is drying up.

We want to see because as the stock looks to breakout, a surge in volume will push it past resistance.

During the volume expansion I like to see more than double the daily average volume.

The next and final indicator I use are the moving averages. These show you the average closing price over a specific amount of trading days.

I use the 8, 21 (both shorter term), 50, 150, and 200 day simple moving averages.

These help aid in determining whether a stock is like to continue upwards or reverse. I especially use the 8/21 SMA for this. If a stock is way above it's 8SMA then I may hold off on buying.

I use this same approach when selling shares. Ideally we want to see the 8/21SMA just below if not very close (dollar wise) on the stock chart. This shows (what we already know/see) consolidation.

Paired up with volume, the SMA's, and S&R we can look at a stock like a slinky.

You remember slinky's right? When you toss a slinky down a stairway, it will expand (stock breakout), and then land on the next step and compress (consolidation).

Ideally you want your stock to act in this way as well. It expands on volume & after the breakout, it consolidates.

Now, onto chart patterns!

Like I said earlier, we're only focusing on longs. I'll be showing you bullish chart patterns.

My personal favorite is the Cup w/ Handle (C&H) and then the good ol' bull flag. Any of these may work for you.

The C&H is great because we test resistance 3 times. I love buying resistance after a stock has touched resistance more than 3 times.

I don't love buying when it touches resistance the first time as the stock is likely touching ATH's for the first time.

After it touches ATH's it may pullback (look at the C&H example). I don't love buying the second time as it can sell off as a result of people selling because they bought at ATH the first time and are looking to breakeven.

The third time onwards is best because...

At that point the "weak" hands are no longer in the stock as they sold the second time. On the third test of resistance is when the stock has consolidated long enough with volume drying up.

This is when the stock is most likely ready to break higher.

C&H's can take months to form (this is ideal). Bull flags tend to form within a few weeks after a stock has made a big move up.

The buy point for these tends to be once the stock penetrates the upper trend line. The sell point tends to be below the support line.

Another criteria for buying a stock should be a good risk to reward ratio (RR). My rule of thumb is use 1:5 RR. You want to make at the very least $3-5 per share for every $1 you risk.

This ratio will make the numbers work in your favor.

Say you achieve the 1:5 RR on a trade. From there you could potentially lose on your next 4 trades and would still be profitable.

My final tip for new traders would be to focus on top right stocks.

What does this mean?

It means buy stocks that are currently near their ATH and consolidating. These companies are more likely to continue pushing higher vs buying a bottom right (usually trash) stock.

There are exception to buying bottom right stocks, but I won't get into it.

A favorite quote of mine is, "what's cheap gets cheaper, and what's expensive tends to become more expensive."

I've found my success as a swing trader through buying strong stocks. Do you have to listen to me? Not at all.

These are only the things that have helped me.

Now that you know the basics of technical analysis, do you have any questions?

My DM's are always open in case something isn't clear to you.

If you've found some value in this, can you RT/like to share with others?

I always want to help!

Thanks for reading!