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Buy low, sell high -- it’s an easy rule to follow.
Unfortunately, selling is often the hardest part.
“Jeez, if only I held that stock for one more day. I could have been up another $2,500” is often the thought process. What we fail to consider is that we made money. We accomplished the initial goal. Better yet, we didn’t lose anything.
Unbelievably, technical analysis is still written off as useless.
In fact, some denounce it as a laughable study of charts, patterns, and squiggly lines without any concrete or profitable results. Others argue it’s only good for short-term trading.
However, none of that is true.
No one ever said technical analysis was easy.
But over time, with practice, the easier it becomes.
For months, we’ve introduced you to several technical tools. However, the one we get the most questions about are Fibonacci retracements. To many, this took is considered complex and outdated. But to be very honest, it’s not complex at all once you practice with it.
Early October 2018 was quite painful for the average investor. Last year, we saw the same problem with the Covid pandemic.
The major indices fell out of the sky. The tech-heavy NASDAQ fell from 8,100 to 7,300. The S&P 500 dropped from 2,925 to 2,725.
All of a sudden, there’s a gap in the chart of your favorite stock.
Surprise news, earnings, something unexpected caused a bout of extreme optimism or pessimism that resulted in the move.
“Why would I want to touch a stock that just plummeted?”
My answer, “Why not?”
What many traders don’t understand is that many pullbacks create opportunities, especially when it happens to a well-known stock.
But that doesn’t mean you should run out and buy any stock because it pulled back.