You have consulted many trading materials and read reviews such as, for instance, thefinancialig.com review. You have understood the basics of trading and now know how to trade and get started without making mistakes. Therefore, you can now level up and put yourself more seriously in a trader’s shoes.
How to identify the patterns?
Trends identified in technical analysis include price limits identifiable in the market price of a stock. The upper limit, which the stock rarely exceeds, is known as “resistance.” The lower limit, where the stock rarely dips below, is called “support”.
Identifying these levels can help traders know when to buy and sell.
Some specific patterns are also detectable in stock charts. The most common is known as “head & shoulders”.
This is a peak price, then a decline. Then follows a higher peak, then a decline, and finally followed by a similar peak to the first. This pattern signals that an upward price trend will end.
There are also reverse “Head & Shoulders” trends, which signify the end of a downward trend in the price of a stock, currency, or another financial instrument.
How to trade in the short or long term?
An investor is looking to find a company or some financial instrument with a prolonged uptrend that will provide growth and, therefore, earnings over a long period of time.
A trader seeks to find financial instruments with an identifiable price trend that the trader can exploit in the short term (very volatile).
Online traders generally use technical analysis to identify these price trends.
In contrast, investors typically use a different type of analysis called “fundamental analysis” because of its long-term focus.
How to trade the different types of orders?
Orders are what traders use to specify the actions they would like their trading broker to do for them. So how do you trade online with the different types of orders?
There are many types of orders that a trader can use:
For example, the simplest type of order is a market order, which buys or sells a specified number of shares at the prevailing market price. In contrast, a limit order buys or sells security when its price reaches a certain point.
As another example, if you place a limit order on security, the broker will only be able to sell the security if the price has fallen to a certain level. This allows a trader to determine the maximum amount they would be willing to pay for their security. That way, a limit order guarantees the price the trader will pay or pay, but not that the sale will occur.
Likewise, a stop-loss order tells the broker to buy or sell a security if the price goes above or falls below a certain point. However, the price at which the stop order sets, is not guaranteed (this is the current market price).
There is also a mix of stop and limit orders called a stop-limit order. When the security’s price exceeds a certain threshold, this order specifies that the order becomes a limit order instead of a market order (as in a regular stop order).