Hello you wonderful and intelligent individuals that make up this forum, i sincerely hope you are doing well.
I was kindly wondering when reviewing a stock, whether its for a long term or short term trade, there is lots of technical indicators that can be used that are helpful. There is so many indicators such as Oscillators, such as Relative Strength Index, Commodity Channel Index, and MACD Level. Further there is lots of different types of Moving Averages such as Exponential Moving Average (10) and Simple Moving Average (10).
I kindly wondered for determining the momentum for either a short term or long term trade, whether just learning what a few of these indicators mean is helpful please? Further or is it a case of the more of these indicators you learn, the more they can help you become successful by using as many as possible, or is a few still effective please? If anyone kindly has any thoughts on this i would be forever grateful and thankful for your support.
Sending you lots of good wishes and i truly hope you become massively successful. All the very best and take care.
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Hi Robert,
In my opinion the indicators you list are useful for technical analysis which is generally something that is used for short term trading, not long term investing. The indicators give you different viewpoints to help you understand that price movement which is important to a trader, but does not give you any insight into the business fundamentals of the company in question.
If you are investing for the long term in a company then you really care about fundamentals. You want to know what the company does, if they do it well compared to their competitors, and how well the company manages its finances. When you invest in a company for the long term, you believe that their stock will do well over the years (decades) because of how well the company manages it’s operations and finances. You don’t really care about short-term price movements that often happen due to temporary factors.
On the other hand, when you trade in the short term you care very much about the recent price movement and the various indicators that help you quantify and categorize the stock prices. As a trader you really could care less about any fundamental factors. When I am trading, I generally know very little about what the company does or if it even does it very well. I don’t care if they make any profits and I have no idea what their revenues might be. I only care about the stock prices and how they appear to be moving.
That said, I consider myself to be both a trader and an investor. The thing is those are two totally separate things and I purposely do not allow them ever to cross. If there is a great company that lots of people invest in, I do not even think about investing if I trade that company or might trade that company. And the companies that I invest in are purposely not the type of company that is good for trading.
Now, I do believe that if you are investing, it is possible that you could use a trader’s technical analysis with all the indicators in order to fine tune your entries so that you are getting the best price or perhaps a price right before it begins to move up. That said, I do not do this. I don’t do it this way because my long term investments are not made based on stock price. I am not trying to buy low so that I can sell high. This is too close to a trader’s goals. My long term investments are made based on income, typically dividends. Big dividend stocks do not typically experience very much in terms of capital gains. Every time a dividend is paid the stock price goes down, and companies that pay big dividends take big ex-div declines. Often the increase in stock price just keeps up with the dividends paid so that the stock price doesn’t really move that much. If you get a lot of cap gains then that’s a bonus, but I’m never looking to sell so it doesn’t really matter.
Lastly as far as my favorite indicators I have posted in other places within this forum about some of the few that I use. Mostly the oscillators like RSI, but I’ve recently discovered Chande Momentum which is very similar. I also frequently look at the 50 and 12 period moving averages, but I don’t really use those lines as meaningful support and resistance like a lot of people do. I never use MAs greater than 50, even though a lot of people do consider those to be support.