Does Stock Trading’s Technical Analysis Really Work?
Looks like Epena is on technical analysis. See her comment on Baidu. No offensive but I don’t completely believe in technical analysis and I don’t rely on technical analysis to do any of my trades. My take on technical analysis is that it will just work 50-50. Because I think any well known stock trading theory is self-destructive. It only works when I am the only one understand it and use it. When many people understand it and use it it will become ineffective. Since technical analysis is well known strategy I don’t think it will work. But if anyone use technical analysis find it works let us know here. Let’s see what the odd is.
I have a silly theory. That is the stock price movement is the weighted average result of tarders’ sentiment on a stock. The weighted factor is the money held in traders’ hand. Let’s say Baidu if the number of bearish and bullish traders on Baidu are equal and they are holding the same amount of trading power then stock price should not move. However if the bearish side of the traders hold a larger position than the bullish side then price will be pushed downward. On the opposite when bullish traders hold a bigger trading position then price will be pushed upward. Simply put price movement is to achieve new balance of the bulls and bears. What we do is to find the imbalance between the bulls and bears and take advantage of it. It would be like guessing the mood of a group of people. I usually make a trade based on the price level, its previous movement and what is happening on the company, the industry and the economy. I don’t usually look at graph.
Take Baidu again. I think it will get close to 300 in a couple weeks and then it will come back and stay around 290 till next earning release. It went up today simply because Goldman Sachs upgraded it otherwise it should back down to $270 level. Goldman Sachs has a lot of power on Baidu and it can easily turn bears into bulls.
I guess I babble too much on my theory. But let’s put it on if you have another one
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It’s true. When the market crashes, everything goes down with it. No exception.