For the last few years, I’ve been interested in trading, whether stocks, indices, contracts, forex or some kind of securities. As such, I’ve taken some time here and there to learn about the basics of trading, with a focus on technical analysis
. Of course fundamental analysis
plays a part in trading, but in most cases I think traders rely more on technical analysis for their decision making. Personally, I think fundamental analysis plays a greater role in investing (ie, buying securities and hold it longer term for it to increase in value) rather than in trading (more short term).
With technical analysis comes the thousands of indicators and studies that one can use to identify potential buy and sell signals. Terms like MACD
, Bollinger Bands
, Moving Averages
and much more come up in technical analysis. This of course, usually leads to so much analysis and thinking that people end up not doing anything at all. After all, the various indicators usually send out different signals that can contradict each other. Expert traders (which I am not) can find a good combination of these and use it to their advantage depending on the situation.
A couple of days ago, I went to a free seminar that was sponsored by a company called GlobalTec Solutions, which promoted a software called 4xMadeEasy. Apparently there’s plenty of commercials on TV about this. Basically, the product is used to analyze 7 major forex pairs in a couple of different time frames (minutes, days, weeks, months etc), and shows the trend it’s going. For each time frame, you can get into more details, and see what seems to be 2 moving averages (it’s just labelled buying pressure and selling pressure on the demo) going up and down. The presenter went through some rules that are used to enter a trade, either buy or sell depending on the direction of the lines.
In short, the demo was quite interesting, but somehow I was hesitant to buy the software. A couple of reasons:
- It cost almost $3K, which I don’t have
- Somehow seems to good to be true, and we all know what they say about things like that…
- Leverage can be a double edged sword. On the graphs, they look like smooth lines, but in between, the movement of rates could wipe out an account if you don’t have enough margin to cover the temporary loses.
- I’ve looked around the internet for research, and there’s mixed reviews about this product.
- I would like to know how many people actually fail making money using this product.
- If this software is as good as it says, why not guarantee it? Allow people to use it for free until they make what it’s worth in trades. Unless, most people don’t make the money back….
So, I stayed put and didn’t do anything with this product. I’ll keep on learning about trading until I’m ready with some capital to jump in. Some good points I’ve learnt so far, and are usually recommended by experienced traders:
- Do not trade money you can’t afford to lose.
- Do not borrow to trade
- Use sound money/risk management techniques.
- Determine when to get out of a position before you get in.
I know I’m not an expert in these things, but I think I understand that the basics of it. Hopefully within the next year, I can find my style and combination of studies to use and trade in a market to see if it’s something I can do well. Any advice is greatly appreciated.
ps. A good place to start learning about investing is Investopedia