Ignorance

That last blog brings us to the issue of "Lack of knowledge/preparation".

Here's the deal. You cannot "hunch" your way to successful trading. You need reliable tools and procedures to make rational stock or FOREX picks. In some markets, like NASDAQ and NYSE, fundamental analysis is useful. fundamentals (or "fundies", as i call them), include such matters as breaking news, balance sheets, management profiles, and overall market conditions. but my observation is that fundies usefulness is very limited. just look at all the so-called "experts" in the financial pages of newspapers and how often they make the wrong call. mostly, their logic is fundies-based.

another tool is called technical analysis (t/a). i'm a big fan of t/a but, as you'll see in my later blogs, i've switched to quant because, in my opinion, t/a is becoming less and less reliable as a forecasting tool. i'll get into why that's happening later (and even show you a hideous example or two), but for now, i want to emphasize that i think it's very important for you to learn some t/a basics. good places to start include:
http://www.stockcharts.com/education/IndicatorAnalysis/indic_MACD1.html
and
http://investopedia.com/university/technicalanalysis/

Also, if you're willing to spend a few bucks for real knowledge, there's a trader i watched for a long time who wrote a t/a course earlier this year. even though at the time i considered myself expert in t/a, i bought one of the first 10 copies because i had watched his performance for so long and was duly impressed. the people on the forum had to browbeat him for a year to make him do it. so he finally did (he hardly needs the money). his name is "greencat". you can find him and his cd at the marketmillionaires.com forum. last i saw, price was around a hundred bucks, which kind of brings me to the issue of buying trading education: mostly, don't do it.

i've seen people waste thousands of dollars on this stuff and still not "really" learn how to trade. most of what they teach is available free someplace else anyway. on the other hand, don't be shy about bellying up to the bar and plunking down some hard-earned dollars for real advanced, innovative education. oh, full disclosure about the abovementioned cd: i do not make any money on it; it's just a resource that i found really useful- i actually learned a lot of important stuff, despite my own previous skill in the field. also, i'm an unpaid moderator on that site. in fact, what i offer on my website is kind of in conflict with that cd if someone's on a tight budget and has to choose.

t/a is all about charts and how to read them. the premise is that all important information about a stock (including consideration of its fundies) is already contained in its price and volume patterns. i do believe that. t/a has hundreds of standard indicators from which to choose, all based on the graphic plots of mathematical patterns. i may talk about some of these indicators later. but i want to re-emphasize: learn t/a. its chief advantage is speed. with t/a you can quickly glance at a chart and judge whether or not to make the trade. but again, i think t/a is slowly losing its grip, which i'll cover in my next blog...