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Summary

  • Stock volatility has increased significantly, creating new risks for you to consider
  • A lot of traders ignore technical analysis as a potential guide to their investment timing
  • Technical analysis can help you limit your losses and let your good trades run
  • Marketech’s Focus offers easy-to-use technical indicators on their mobile and PC based platform

Technical analysis sometimes gets a bad rap. Often seen as a confusing dark-science, technical analysis can assist you to time your entries into a stock, take your profits or cut your losses.

In a bull market it is very easy to ignore the risks, or even the fundamental analysis of a stock. Currently the market is seeing companies act according to the herd, and not necessarily according to sense – or underlying valuation. This removal of logic is the perfect time for technical analysis to help, as the herd will often move in certain ways or patterns.

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There is a lot of information available on the internet on how these pattern recognition equations can help you see ‘patterns within the noise’ of the day-to-day market. What Marketech Focus have done is to make it easy to use, and mobile.

The first thing to note with technical analysis is that there are a number of different charting types available, each with a different reason for its use. The most commonly used chart type is the ‘candlestick’ that will visually display the opening price, closing price, but also the highest and lowest price of the day.

Other chart types are more specialised (eg: The ‘Kagi’ removes time from the charts, and only displays whether the stock is trending up or down). You can learn about these as you go, and they are all easy to switch on and off.

The next factor is the timeframe. Most people will only look at a daily chart, but this may come with a lot of ‘noise’ as the markets jostle around a lot on short-term factors. Moving your timeframes out to a weekly, or even monthly can help you see whether the stock is generally trending over time, rather than worrying about what it did today and yesterday. Like a house, many share investments should be considered over a longer term.

Equally, if you are a day trader, you will need ‘intraday’ charts, showing you the way, the stock moves around during the day.

First up, a very simple chart to show you how some trends may play out. In this case, we use the chart on a daily timeframe.

In the below example, you can see that the price has generally trended upwards and bounced each time it touched the blue line. Yet in the last case, the price fell through the line, and this may have given you a chance to exit your position - and either rebuy lower, or look for another company that is trending more obviously.

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Another simple indicator is the ’Relative Strength Indicator’, or RSI. As you will note from this chart, the RSI was a very strong indicator for each of the major ‘tops’, where the stock was ‘overbought’ and then dropped to a lower level. Though never perfect on its own, it would have been a lucrative trading partner in this case.

Image Source: Marketech

Sometimes ‘moving averages’ can help you trim out the noise and focus on the bigger trends. In the following image, you will note that the dark line is a shorter-term average (12 day average) and the red is longer (28 days). When they cross over, it can be an indicator that there longer-term forces at play, and may indicate a general trend change. So, they can be used to decide on an entry, or an exit.

Image Source: Marketech

A little help from trading platform

There are 24 different technical indicators in the new Marketech Focus trading platform, and when coupled with their low brokerage and mobile app (with price alerts), you may find that your trading game can be much improved. Keep in mind that technical indicators are not a fail-safe, and should not be completely relied upon, but can enhance your abilities - once you understand their use.

INTERESTING READ: Marketech Focus, a premium low-cost ASX trading platform, set to enhance your stock trading experience in 2021

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You can use the practice account to hone your skills, then enter a trade, set an alert to keep you informed of the market movements during the day, then quickly action any trade from your phone without needing to be constantly monitoring the market during a busy workday.

In this market, where there is a larger than normal amount of risk and volatility, you may find that gaining some knowledge of technical trading and using the latest low-cost trading mobile platforms will aid you in trading!

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