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How can I make Profit from Technical Analysis consistently?

by Sakshi Agarwal on Basic Technical Analysis, Candlestick Patterns, Technical Analysis
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Introduction

Are you worried that technical analysis may be too difficult and “technical” for you? That its only for the experts and professionals?

The answer is No.

Technical analysis is not so complex or it cannot be done only by experts or professionals. Anyone can make money out of the technical analysis. In this article let us discuss how one can make profits from technical analysis consistently:-

Gain Sound knowledge on Technical Analysis

It is important to understand the indicators, the positioning of various patterns and various tools. It is even more important to become aware about the importance of adopting money management practices and also dealing with psychology.

Most traders fail to profit from the technical analysis because they are in a hurry in implementing the indicators and patterns rather than having the patience to first understand those patterns and indicators. Learning about Technical Analysis will help the investors to understand the core logic behind its mechanism and also help you to identify which patterns to trade and which ones to avoid.

Apply various types of Technical Indicators

One should always choose a combination of 2-3 technical indicators. We should not rely on only one indicator as sometimes the indicator gives us a false signal. We should remember that technical indicators only confirm the price movements. These false signals given by these indicators can be avoided by using price actions and other technical indicators.

Identify High Probability Trading Opportunities

 Every investor wants to find high profitability trading setups, but the thing is they don’t know how. Instead of looking at the prices, you are looking at indicators without understanding the purpose of it. Instead of following trends, you are predicting market reversals. Instead of proper risk management, you are putting huge bet as the trade feels good.

If you are doing any of the above then it will be difficult to find high profitability trade. One of the simplest ways to identify high profitability trading setups is to follow the trend.

“Trade in the direction of the general market. If it’s rising you should be long, if it’s falling you should be short.”  – Jesse Livermore

When the price is in uptrend, one should stay long. When the price is in downtrend one should short.

identifying chart patterns

By trading with trends we can see that bullish move (green) goes much in our favor compared to the corrective move (red).

Identify and Master Chart and Bar Patterns

Every day we have to choose among a hundred trading opportunities. This is because a wide range of factors affects the market. Therefore it is important to use technical analysis to succeed in trading with the candlestick and other patterns.

Chart patterns form an important part of trading. These patterns provide a clear picture and also give us trading signs of future price movements. The best patterns are those which form the backbone of a profitable trading strategy.

RSI, volume, support and resistance levels confirm these patterns. Stock chart patterns play a crucial role in identifying breakouts and trend reversals. This is because history has a habit to repeat itself and the financial markets are no exception.

technical analysis bullish

From the chart above we can see how a candlestick pattern, “Bullish Harami” gave a bullish signal with volume confirmation.

Gain through Understanding on Money Management and Trading Psychology

Trade Psychology:

The psychology aspect of trading is very important. Traders due to their quick decisions often dart in and out of stocks on short notice.  In order to accomplish this, they need a certain peace of mind.  They need discipline so that they stick to their established trading plans and know when to book profits and losses

Money Management:

Money management is an important element in trading after trading psychology. But novice traders often neglect and only focus on technical analysis. But in order to survive in the stock market, you must know how to manage capital.

Capital is the determining factor of our trading. The more we have the more possibilities we have to develop and the more we can spread out the risks. Our capital should be considered in the same way as business capital.

Bottom-line

As discussed above we can see how simple candlestick patterns and trends can give us signals. If we learn about technical analysis and implement it in a simple way, we can consistently make profits from technical analysis.


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Disclaimer

Elearnmarkets.com wants to remind you that all our content is created solely for the purpose of education. No strategy, stock, commodity, fund or any other security discussed here is any way a recommendation for trading or investing. Elearnmarkets.com will not be any way responsible for trading losses incurred by any individual or entity for trading with real money. Please take advise of certified financial advisers before trading or investing.

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