Shares are like people, they have certain characteristics and patterns of behaviour
Understanding a share’s personality can give you an edge when trading it.
Timeframe:
•Whenever you look at a chart of a share for the first time, pull out the maximum timeframe
Get a feel for where the price has been and where it is now with respect to it’s history
Toggle to the monthly bars for clarity
Long timeframe:
Features to look for:
Alltime highs and lows
General trends over long timeframes
Channels and trading ranges over long periods
Support and resistance over long periods
Relationship of current price to these features
Medium timeframe:
Now you can home in on the medium-term and look for features specific to that timeframe
Establish trendlines
Establish major resistance
Establish major support
Look for larger scale chart patterns such as ascending and descending triangles, double tops and bottoms
Characteristics of Price action
Now look at the price action itself and look for:
Volatility
Spiky daily price action
Price spikes
Gaps
Sideways
In deciding on these price behaviours:
Look at the frequency of the events
Avoid stocks with wild or step-wise price action (they will probably have bigger spreads anyway
For stocks that have wide daily ranges:
Use wider stops, but watch for adequate risk:reward
Possibly use limit orders to close your position at your target
If you trail stops give plenty of space
Also look for:
DMA’s and trend lines that have acted as support
Chart patterns that frequently appear and work favourably
Powerplays that have been winners off support and DMA
You can learn a lot about your stock by looking back at the history and doing some analysis
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