Technical Analysis Setting Realistic Expectations

To give you a context again, Technical Analysis is a well-known method for carrying out practical information about the stock like: 

  1. Price at which stocks should be purchased and sold
  2. Risk involved
  3. Anticipated reward
  4. Expected holding period

It helps us formulate an opinion on a particular stock or index and define the trade while considering the entrance, exit, and risk. 

Here’s the expectations that you have to set before delving more into Technical analysis. 

Market participants often view technical analysis as a potential source of making profit quickly and easily. However, this is not a simple process and requires a lot of dedication and hard work. If done correctly, one can reap consistent rewards, but it takes a great deal of effort to get to that level.

It is critical to set expectations before diving into the realm of Technical Analysis (TA), or otherwise, a trading disaster could be imminent. Trading with TA is not a foolproof way to generate profits quickly. If an issue arises from it, the fault rarely lies in the approach itself but in the trader’s implementation.

Technical analysis is ideal for finding short-term trades, while fundamental analysis is more suitable for long-term investments. Those who prefer the latter may also want to consider incorporating TA while choosing entry and exit points.

TA-based trades are typically quick, so don’t anticipate significant earnings in a short amount of time. To capitalize on TA most effectively, try to find frequent short-term opportunities which can provide steady gains.

Technical analysis-based trades generally last from a few minutes up to a few weeks and seldom exceed that. We will look into this issue when we discuss timeframes.

Traders may enter the market for a specific reason, yet if the stock moves against them, they could incur losses. It is typical that, in these instances, traders remain in their trade in the expectation of recouping their money. 

However, it should be noted that technical analysis-based trades are usually conducted on a short-term basis; therefore, if the investment falters, it is advisable to limit the losses following the thumb rule of keeping stop losses and look out for new possibilities.