Beginner Stock Investing Education: How to Analyze a Stock Chart

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Absolutely! Here is a Step by Step Beginner Stock Investing Plan

Below are the three steps you can use to analyze a stock chart.

Step 1: Ask yourself what you are looking for in the chart. What trading chart patterns are you looking for?

  • Are you looking for a bullish trend?
  • Are you looking for a bearish trend?
  • Are you looking for a sideways trend?

successful trading for beginner investors

Step 2: Depending on your answer in step 1, you can then use technical analysis correctly

Moving averages

  • If you are looking for a bullish trend, then you would want the stock price above the 200-day moving average
  • If you are looking for a bearish trend, then you would want the stock price below the 200-day moving average
  • If you are looking for a sideways trend, then you would want the stock price hovering around the 200-day moving average

Again, step 1 in beginner stock investing plan is to determine what trend you’re looking for. Step 2, to place the 200-day period moving average to identify the current trend of the stock.

Step 3: Determine the probability of your trade’s success

If you are bullish…

  • Buy a stock trading above the 200-day period moving average because that stock has a 60% probability of going higher
  • Avoid buying a stock trading below the 200-day period moving average because it only has a 40% probability of going higher

Trading is a probabilities game. The higher your odds, the better the chances of your trade going in your favor. If you are looking at going long, let’s say you bought a stock at $40 and you want to take profits at $50, you do not want to buy a stock that has a price trading below the 200-day period moving average. This is because the chance of that stock of going from $40 to $50 is only 40%. However, if it’s above the 200-day MA, the stock price has a 60% probability of going higher.

Recap the beginner stock investing 3 step plan to analyze a stock chart 

1. What do you want to do? Buy or short?

2. Place the 200-day moving average to determine the dominant trend
If the dominant trend is bullish and you want to buy, then you’re in luck. You know you have a 60% probability. If the dominant trend is bearish and you want to buy that stock, you only have a 40% probability that that trade is going to work and a 60% probability that it’s going to continue going lower.

3. Know your probabilities

There are traders who are considered contrary traders. Contrary trading is when you trade against the dominant trend. Example, when the stock is bearish, it’s below the 200-day MA, they still buy that stock. They take their chances at that 40% probability. These traders have the experience and knowledge that beginner traders don’t have. This is why beginner traders should never trade contrary trends. For the first 6-12 months of your trading career, you should stay away from trading stocks with less than 60% probability or else you will get chopped up pretty good.

 

Online Stock Trading BlueprintNow, if you’re just starting out and your aim is to understand stock market charts, then following a step-by-step system that feels easy and quick to implement must be your first priority. The Online Stock Trading Course gives you the most important things to do to set up simple, solid online trading systems, so that you consistently make the right investing and trading decisions. It’s all step-by-step, not a big mishmash of things. So, you do step one of the system, and when you’re done with that, you move on to step two, and so on. All the tools, charts, templates, and examples are handed to you on a silver platter. Easy. You can get it at Online Stock Trading Course.

 

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