Even if you are an experienced professional, sometimes, it is still quite hard to predict returns from the stock market. As it is known that there exist no definite way to make a completely successful prediction, however, you could resort to certain kinds of techniques for more possibilities for success. As far as novice traders are concerned, you should be extremely careful about such new techniques. Here are a few tips you could consider in trading small sizes or applying a virtual trading account in order to avoid risk remarkable losses when you first use a method you have never tried before.
1. Go for the head and shoulders patterns.
When you start with stock trading, you should learn to know the chart patterns, which are regarded ad the most common and easiest approach to prediction of stock market returns. Such chart patterns could help you build up investing confidence on the basis of the historical results of recurring scenarios. Therefore, the “head and shoulders” pattern is considered as useful one depicting the chart development which is often cited by the news media in financial sector. The head and shoulder pattern is formed with three peaks in the process of price fluctuation, when the middle peak would be the highest peak. The name of the pattern comes from the resemblance of a head in the middle together with lower shoulders on each side. Furthermore, the inverted version of “head and shoulders pattern” often leads to higher prices.
2. Focus on trend analysis.
Among all other techniques for prediction of stock market, the technique of trend analysis should be the effective and simple. If a stock is going to trend, it should often move on a consistent way to either profit or loss, based on the direction in which trend moves. Once you enter an up trend, you should enjoy such noticeably stable phenomenon. Therefore, it is easy to identify a trend in the analysis of stock market. Trend analysis was put into operation by Charles Dow 100 years ago, whose theory is used to define a trend as a repeated appearance of new highs in accompany of higher lows. The trend of a stock could be illustrated in the following way: when a stock gets to a price that is higher than its other prices in past history, and then it would move down to a low that is higher than the its previous low prices. If you are aware that such pattern has repeated over many following highs, that mean the trend is strong. At this time, you could be capable of predicting that prices would go up over a period of time. However, there is no certain approach in accurate prediction of when a trend is ended; it could run longer than the investors would see.
3. Learn to know the technical indicators.
It is quite common that by making use of technical indicators some investors could successfully predict returns from stock market. Such technical indicators could be to a price chart by using stock charting software or charting services on the Internet. Through a specifically designed formula, an indicator could be used in evaluation of price history. In this case, you could then better understand the results of the indicator’s for further interpretation of future prices. Among many other technical indicators, the most useful and common are regarded as “oscillators”, one of which is the MACD, standing for “Moving Average Convergence Divergence” that creates its special sub-graph below the price chart. It is used to for measurement of momentum by a formula that could clearly indicate the past prices at average. If prices go up in a new high, whereas the MACD move for a lower high, such situation is regarded “divergence.” The same thing happens when prices move down to a lower low, whereas the MACD is in the position of a higher low. So, you could see divergence as a possible reversal of market prices. It is much considered by most traders to be dependable enough in their daily stock trading.
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