When you look at fundamentals and technical, remember, that fundamentals are very similar to technical.
Usually stocks with great fundamentals have great charts.
Stocks with great charts have great fundamentals.
However, when you’re looking at fundamentals, let’s say you get a report that’s 50 pages long and you’ve got all these earnings to go through.
All these reports to go through how far you went to digest the information.
When it comes to the technical, it’s a little bit different.
As you look at the charts, the charts are kind of never ending.
Things can get a little bit distorted in that.
Let me share with you an insight here and a small little concept and kind of this first point.
It’ll open up your mind a little bit more about what most people miss when it comes to the technical side of trading.
Let’s take a look at this first point.
If you’re looking at a chess game and I’m looking at it from this perspective.
Now can I really understand what’s going on in this game?
You might say well no because I’m missing a lot of the data.
I’m missing where are the chess pieces positioned
I’m not seeing the overview of the board from the top.
Why is it that when you play a chess game you get to see the full board?
A lot of times when you’re looking at a chess game you always see it from the top side.
You see it kind of like this
You want to see the full board, right?
You want to see the bigger picture
Now, why is it that we don’t do that in the stock market world?
Why is it that we zoom in and maybe just focus in on a little segment or a little part of the board?
Why is it that we don’t see just this little area.
This is what people are doing in the stock market world.
They’re seeing this whole part of the board but they’re not seeing the other part.
This is what I want to show you right here. This is how this works.
When you look at a stock chart, what people do is we have time frames.
We have Daily, 2-Day, Weekly, Monthly, Quarterly, Yearly, 5-minute, 15-minute etc.
This is where it gets a little more confusing because we’re dealing with time and time is almost infinite from our past to our future.
You have this time frame concept and this is really where the whole confusion lies within stock chart.
For us as a trader, we need to just concentrate on a certain specific time for today, for the next week, for the next month.
We’re looking at it from our perspective — from right now, moving forward and what’s gonna happen.
Now we use history as a way to guide and measure moving forward but we’re really looking at kind of what’s important for us in the current time frame.
So we’re really taking our glasses and we’re focused in on that zone.
This is where the problem lies, is that too many people get into this 5-min, 10-min, 15-min mark and they try to make their trading decisions based on these kind of time frames.
They say that they’re going to go in to a stock but then all of a sudden that stock starts selling off a few days later.
That becomes a huge issue and problem.
They’re really looking in at seeing the trees but they don’t see the forest.
They’re zooming in at a certain specific point in time like this.
This time frame is a 15-minute.
If you go into the daily
The daily is actually a downward movement.
That bar looked good but overall you’re moving down
Let’s go into the weekly.
The weekly doesn’t look very good either.
So imagine that? You’re looking at it from a certain single point of view
That’s the problem.
A lot of traders when they go in and they focus looking at charts.
Look at charts a very small amount of time and focus on your position much more.
I’m trying to emphasize that more recently because I think too many people get too far into the charts.
When you look at these charts, you know you got to look at them from multiple perspective.
Here’s a three time frame view that I like to look at.
I’ve got the monthly, the weekly and the 30-minute.
If I want to draw a line or perspective, like in this case, I might draw support or resistance.
I’ve got a line right here on my monthly, that way I understand the bigger picture.
There’s my weekly line, it’s the same line my medium term picture.
How do I make my trade decisions if I want to enter that trade?
Well you can see now that it’s not really clearing the bigger picture.
If it’s not clearing that and you’ve got resistance on the bigger time frames.
Why would you go in it?
Why would you go into the trade?
That’s what people do, they go in into these trades right here early.
They think that this is a good breakout point.
They think this is going to work well, when in fact you’ve got maybe resistance right up ahead.
If you were to look at maybe the weekly and the monthly time frame, now you’re going to probably say, well, I’m a day trader. I don’t really need to worry about the weekly or the monthly.
Well, wouldn’t it be nice to also have other things moving in your favor?
It’s kind of like you got gas in your car and you’re driving a thousand miles. You got a full tank of gas. You’re not worried about the snow storm or the winter storm.
Maybe you’d make it, but wouldn’t it be nice if you had a little bit of a cloudy day or even slightly sunny to drive through?
So in the same way in trading, wouldn’t it be a little bit nicer if you had also people that are trading longer term, moving in your favor?
You’d have more people on your side meaning more fuel would come into the stock and make the move to your direction a lot easier.
That’s where I think many people go wrong with charts as they hone in and they focus on the single time frame.
Whatever one they think is better.
They don’t combine it with the bigger picture.
There is where you’re missing seeing the forest seeing the bigger pictures.
Zooming out of the world and seeing the whole picture when in fact you’re just zoomed in into your world of seeing just a few of the trees or even the bark or just the leaves.
You’re not seeing the whole perspective.
So that’s what I want to challenge you to look at multiple time frames.
The monthly, the weekly, the daily, start with maybe three.
So time frames are very important.
If you can get more things in your favor, to push that stock in your favor, it just makes that run a lot easier.
It’ll help fuel the stock in your direction.
