Stock Picking Strategies, Part Ten: Technical Analysis
Today, we’re going to wrap up our series on stock picking strategies. Over the course of this series, we’ve looked at the stock picking strategies that are most commonly employed to great success by those who’ve been in the investment game for a while. While we recognize that no one strategy is going to produce a winner every time, we thought it was worthwhile to look at these notorious techniques to see what each one had to offer in comparison to the others.
As is fitting for a series like this, the last stock picking strategy we’re going to look at is one that is completely different in every possible way from everything that came before. While up until now, the underlying basis of every strategy we’ve covered has been the principle of fundamental analysis, today we’re going to turn that on its head by looking at technical analysis.
Technical Analysis
Technical analysis is focused almost entirely on the view of the market as a whole, with an eye towards its predictable trends and future prices, rather than the makeup and foundation of any one company. As a result, it’s the most predictive of stock picking methods, and in some ways the most radical. It is not without those who swear by it, though.
Technical analysis asserts that just by looking at the prices on the market, we can learn a lot about where that market is moving, because prices tend to move in trends. Working from the maxim that history tends to repeat itself, technical analysts often invest in those companies that show good trends based on market charts, rather than the intrinsic value of the company behind a stock.
Lookout For Market Movements
For that reason, many decry technical analysis as a stock picking strategy with no long term usage. And indeed it isn’t. That said, it never claimed to be. Because a technical analyst is constantly on the lookout for market movements, he or she tends to spend little time sitting on any one stock for very long. They prefer to soak up the profits (or losses) from rapid movements, and then move on, rather than worry about the long term gains to be had from any one stock.
That wraps up our series on the most popular and arguably effective stock picking strategies. Hopefully by now you’ve learned enough to start developing your own strategies, and that they’ll pay off for you in the long run. Join us next time as we embark on an all new avenue of exploration in the exciting world of stock market investment.
Thank you for hanging around for Bullhunter’s second investment series: Part 1 – 10 of Stock Picking Strategies.
Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008
July 22nd, 2008 at 7:12 pm
Hi Sean
Good to see you included technical analysis.
I would point out that those who are technical analysts, in the true sense of the words, certainly don’t rely on rapid movements ie. complex reversals in prices, rather analysis of long term trends.
The true technical analyst is a mathematician versed in probablility and statistics based on many years of trading trends, from many markets from which this form of trading is based.
Often though, we have a friend who is a fundamentalist with whom we work to make ample gains whilst trading.
Great series Sean.
Regards
Gary Crawford
July 22nd, 2008 at 11:23 pm
Thanks for the effort you have put in in producing this educational and informative series Sean - as your good mate Bill Stacey says -”you can never know too much” and you would have to agree. I look forward to whatever you come up with next.
all the best
Rob.