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Technical Analysis: Essential Exit Rules

computer phone man redWhen new participants enter the speculative arena, most time is generally spent using technical analysis to look for a high probability entry technique. Technical analysis is the use of price, volume and chart patterns to make trading and investment decisions. Amateur traders believe that with a ‘sure-thing’ entry technique, profits are sure to follow. This could not be further from the truth. I’m sure you realize that the ‘Holy Grail’ does not exist and yet, how many hours do you currently spend looking for that perfect entry or indicator?

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How to Design Stock Market Trading Systems

design trading systemsStock market trading systems are often touted by slick sales spruikers at expos and in the media. These spruikers are selling a dream, a "get rich quick" scheme via their stock market trading systems that are apparently so simple that anyone can make millions and sit back on a beach with their laptop trading the markets - yes, even you! (BTW - that's you in the tree.) However, the reality is that these trading systems were designed for someone else, not you. The system may not suit your personality, risk appetite (to achieve the amazing results they spruik generally requires massive levels of risk) or lifestyle (do you have the time to sit in front of a computer all day punting?) So let's get real. Stock market trading systems can be designed by anyone. Let's start at the beginning and see how it's done. Many beginners, when learning to trade, are told to create or develop a trading plan.

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Technical Analysis Does the Hard Work

Nick arms folded flipInvestment Talk with John Hallows Sunday Telegraph, 27th November 2005
Over the years I’ve has a lot of fun being rude about technical analysis – to give what’s usually called “charting” its proper name. What always sparks my doubt is that the markets generally rise or crash as a result of outside, non-market events, which market graphs can’t predict, whatever enthusiastic chartists suggest. But now I have to haul up the white flag on this long-cherished position.

I’ve finally found someone who makes sense with technical analysis. And he spells out two important points that every direct share investor should know about. This light on the M4 to Damascus was shone by Nick Radge, a one-time Macquarie Bank Associate-director who’s still under 40 and lives comfortably in Noosa, playing the active investor on the markets and the charting guru for clients. His first principle should strike chords with finance professionals as well as normal investors.

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How Does Nick Radge from The Chartist Manage his SMSF?

My self managed superA few people have commented, after reading Unholy Grails, that they had no idea The Chartist did anything other than charting analysis. So I would like to introduce you to the strategy I use for managing our SMSF: the Growth Portfolio. The Growth Portfolio is designed to captures trends - trends in the market and trends in individual stocks. The Growth Portfolio is a pure trend following strategy designed to keep you fully invested during bull markets and in cash during prolonged bear markets. Its unique Index Filter ensures that your capital is protected during events such as the Global Financial Crisis.

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What is Technical Analysis?

stock chart manTechnical analysis assumes that price reflects all that is known about a company at any given point in time. Of course, the disciplines can be combined. History repeats in many walks of life and price action that represents supply and demand, driven by the psychology of market participants, should be no different. Therefore it makes sense to me, that analysis of historical data is really a search for repeatable patterns or occurrences within that data that may repeat in real time over and over. It is a process of stacking the odds in your favour rather than one of prediction. It is a process of utilising probabilities and statistics.

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