Moving averages: use and methods

When using technical analysis, I prefer the most simple, objective methods. The reason for this is that these methods are the used the most and are objective, which give the best results. In an earlier article, I discussed the different types of technical analysis and I promised to describe different indicator driven technical analysis methods. In this article I will discuss the use and different variations on the moving average method. One of the goals that the moving average can be used for, is identifying trends.

(Un)predictable

Lots of investors and investment experts try to make predictions about the stock market. For their predictions, they use technical analysis or predictions about specific shares. But can predictions about the stock market be made? Or is it impossible to make predictions about the prices of specific shares? In this article I will explain how (un)predictable the stock market really is.

Graham's number

Benjamin Graham was the mentor of Warren Buffett. Besides being the mentor of one of the worlds most successful investor, Benjamin Graham has had a number of interesting ideas and theories. One of these theories is the so-called Grahams number, which is determined by the net current asset value (NCAV). The purpose of Grahams number is to find undervalued shares.

Successful selling

All investors are looking for the right moment to buy shares. The right time to buy shares is determined by the price of a share and the trend in which the share is moving at the moment. Tools are used to determine the right buying opportunity of a share. Besides that, it takes a lot of time to figure out what the trend is. But what about selling shares and the selling opportunity?

Investment experts and predictions

Investment experts who are making predictions about investing, can be found at many places. Most of these predictions are based on experience or theories of these experts. In other articles, there is already written that predictions should never be taken for granted and being the whole (possible) truth. But how can you identify an investment expert that is reliable, and how can you see what is a good prediction and what is not.

Technical analysis

Technical analysis of shares means that quantitative data is used to predict the future price of a share. The main quantitative data is the chart of the historical price development. A trend in the chart is searched, after which the future prices is predicted. This is done by adding a top line (resistance) and a bottom line (support) to the chart. Both lines do not have to be horizontal lines, but can also be draw into the chart diagonally. Also the tops and bottoms for shorter and longer terms can be taken into account.

What is the risk of investing?

In short, risk is, in terms of an investor, the chance that an investment will result in a loss. To be more precise: Risk is the probability that the downward potential is partially used before investors can anticipate. The latter is important because if an investor knows in advance that a stock will fall, then the investor will not buy the share. The investor would try to make a profit of the downward potential of a share by, for example, buying put options or sell call options.

Decision making

Before you buy a product, you go through a decision making process. During this process, personal preferences are weighed and the best choice is being made. At least, that is what everyone thinks their decisions are made. However, often a decision is made in an intuitive way, without weighing all different alternatives. This certainly is the case in the decision making process for investments.