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The foundation of technical analysis is the idea that a stock’s price moves in predictable patterns that may be recognized and exploited by traders to make money.

This is a straightforward concept, but it can rapidly get convoluted if you add other layers of indications and time frames on top of it.

Technical indications are most helpful when they allow you to make a decision right away rather than dragging you deeper into the rabbit hole.

Here are some pointers that you should have in mind as you work through this module.

Understand the Resistance and Support

This is the cornerstone of technical analysis.

Every indicator’s usefulness is inextricably related to price and the recurrence of recognizable growth and retraction phases.

Make a broad observation of how the price has changed and where the levels of resistance and support are before adding levels of intricacy to charting these patterns with moving averages and money flow.

Your ability to see a trend quickly will improve if you train your eye to recognize common, repeating price changes.

Extend the Time Frame

It is simple to develop the behavior of myopically scanning the five, 15-minute, or one-day charts for the action that indicates your entry point into a stock.

However, as a value investor recognizing longer-term price trends in a company is crucial to understanding its fundamentals.

You can learn not just how a stock moves but also why.

Avoid depending too heavily on one type of indicator.

Although there are literally thousands of technical indicators, they can all be broken down into four primary groups: volatility, momentum, trend, and volume.

Knowing the differences between each of these types of indicators is similar to understanding the differences between the stocks in your long-term portfolio.

You want to diversify your analysis, just like you would in your portfolio.

It’s acceptable to rely strongly on one volume indicator, but it’s not okay to rely heavily on four separate volume indications.

It would be unnecessary and would just complicate your decisions.

The Trend Is Your Friend

The trading axiom “The trend is your friend” is well known. And with good cause.

While practicing Invader investing, We’ve seen a lot of other investors become focused on a concept and then show too much reluctance to confess their error when it presents itself with the opportunity to jump on to decisions.

Please note that we are not advocating following every trend your charts indicate.

But whether you’re a long-term investor or a position trader, our advice when it comes to bucking a trend is to proceed with extreme caution.

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