“90 percent of stock traders lose money that’s why you should avoid trading and go for investing long-term instead” I hear this a lot. The funny thing about this statement is that those who say this have not traded stocks in their life. They just heard this from someone who heard it from someone and assumed it to be true. I don’t like ignorance. If you say something at least come up with facts to back it up.
Look at this chart. This is PLDT with stock code TEL. If you invested in PLDT 5 or 7 years ago you probably lost a lot by now.
These are not third liners. These are blue chip companies. So, slow down with i’d rather invest than trade. You can both lose either you trade or you invest as well as you can both gain on it. The only reason a lot of traders lose because there are a lot who prefer to trade than to invest. That’s it. 100 people trade versus ten people who invest for twenty years. Of course there will be a lot of losers in trading. I don’t glorify trading. I don’t glorify investing. To me they are both trading with different length of time. Long term trading and short term trading. Investing to me is what Warren Buffet does. He buys a stock and has no plan to sell it. He might sell it if it goes too expensive but we are talking about twenty to thirty years of holding here.
I don’t want to convince you to be a trader like me. I just want you to not be ignorant. So let me tell you why i trade. I like investing as well but i found out through experience that it requires great skill in stock picking and only a few has those.
Imagine if you pick XURPAS as the stock to invest in.
So why traders use charts?
So I opted trading since i can get in and out of stock any time i desire. Traders use charts. WHY?
Would you get onto a busy highway on foot with your eyes blind-folded, not knowing on which part of the road you were, whether you were pointing towards one direction, the other direction or the median? Well, neither would you get into a stock not knowing whether it is going up, down or sideways. There is one reason for you.
Would you get into a stock not knowing whether it is near the highs over the past 10 years? Or near the lows. I trade stocks using charts because it is the easy way out. You have thousands of stocks available. Some will go up and some will go down. Picking the ones that are likely to go up is not easy. If you use charts it saves all the deep thinking.
This is not about Technical Analysis versus Fundamental Analysis because I for one finished a degree related to math and I also learned Fundamental Analysis earlier than Technical Analysis.
Now, what really is a chart?
A graphical representation of an asset’s historical price action. A price chart is a sequence of prices plotted over a specific timeframe. A chart tells you a story kung nasaan ang price ng isang stock sa past at present. Sample: bumili ka ng balut sa halagang 12 pesos kanina. Kahapon ang presyo ng balut eh 11.5 pesos lang. Nakaraang linggo ang presyo ng balout eh 10 pesos lang. Nakaraang buwan ang presyo ng balut eh 9 pesos lang. Three years ago ang presyo ng balut eh 5 pesos lang. Instead na isulat mo ito sa papel in words or in digits, gawan mo na lang ng chart at ilagay ang mga presyo. Ganun din sa trading. Instead isulat ang presyo ng stock araw araw eh para mas madali ginawan na lang ng chart. Marami uri ng chart.
”Ano ba yang chart chart na yan ang complicated naman nyan”
Maraming uri ng chart pero pinakacommon na gamit nating mga Pinoy is yung candlestick chart. It looks like this picture sa baba.
Huwag muna mag react at eexplain ko pa ng maayos para maintindihan.
Ganyan yan. Kapag green ang candle meaning nun nagbukas siya sa baba at nagclose sa taas. Kapag naman red ang candle meaning nagbukas sa taas at nagclose sa baba. Ano ang nagbukas at nagclose? Ang price ng isang stock.
Ang green na candle tawag ay bullish candle at ang red naman ay bearish candle. So ulitin ko, sa loob ng isang araw kapag ang candle ay nagbukas sa mataas na price at nagsara sa mababa na price magiging pula ito. Tawag doon bearish candle. Kapag naman nagbukas sa mababang price at nagsara sa mataas na price green na candle kakalabasan nun at tawag dun ay bullish candle.
Ang simple diba? Kaya kami gumagamit ng chart ay para malaman ano nangyayare sa isang stock. Tumaas ba o bumagsak. Para din malaman ano nangyare sa kanya kahapon, nakaraang buwan or even nakaraang taon. Nakakatulong ito sa pagbuo ng aming trading decisions.
I use chart. I use technical analysis BUT (at malaking but ito) I only use things that make sense. I understand Fibo retracement. I can plot it. I can teach you how to plot it. I have a lesson for it soon but i don’t use it. I don’t find the explaination of fibo retracement good enough to make sense especially that it was created for counting rabbits a by Leonardo Pisano Bigollo a long time ago. As i said, traders use it but i don’t. In fact I don’t use a lot of technical indicators most traders use.
If an indicator doesn’t make sense to me I don’t use it. I research and learn about them so that I won’t be ignorant but if they don’t make sense I avoid using them. This is in fact one of the reasons why a lot of Fundamentalist like me. They like the fact that I understand Fundamental Analysis and Technical Analysis but I only use what makes sense to me. I don’t use candlestick patterns. I just realized now writing this blog that I use only a handful of technical indicators on my trades. I respect people who use Fibonacci Retracement, Fundamental Analysis, Technical Analysis, etc.
There has been a decade long arguments between traders who us TA and FA on which one is the best. I don’t know which one is best. Some TA makes sense to me and some don’t. Some FA makes sense to me and some don’t. I think if i would be asked to take a side i will judge them by the result of their trades. If you use TA and you get good results then go use it. If you use FA and you get good results then use it. If you use something just because a lot of traders use it then you are not being smart.
I often trade using a moving average. Yes, moving average is a lagging indicator. I won’t argue with you on that. Let me educate you on why I use it. It is lagging behind the price meaning nauuna lagi magpalit ang presyo kesa magbago ang moving average. That being said, think of moving average as a dog that follows you around. I use ALMA as my moving average. So think of ALMA as a dog na sunod ng sunod sayo. Ikaw ang price at ang dog yung ALMA. Kapag ikaw na price ay bumagsak meaning nglakad ka paatras mabubundol mo ang aso or masasagasaan mo ang aso. Kapag nabundol mo ang aso yun ang signal ko para umexit. Kapag bumagsak ang price at nabreak ang ALMA yun ang signal ko umexit. It means na nabreak ng price (represented by candle) ang ALMA na nag aact as support. Kapag naman nauna ang aso sa akin at biglang umabante ako meaning tumaas ang price at nabundol ko or nasagasaan ang aso yun naman ang signal ko para bumili. Nabreak ni price (represented by a candle) si ALMA that acts like a resistance. Let me show you sa chart.
That is the reason why i use charts. I don’t use it because others use it. I use it because it makes sense to me. I don’t hate fundamentals. I don’t hate technicals. I hate ignorance.
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