What is technical analysis?
Technical analysis is a method of stock analysis that uses price/time charts to find patterns that give signals to buy and sell particular stocks. The method often uses a variety of indicators which are mathematical equations applied to the price/time data to yield other graphs in which the moving lines can potentially give additional buy and sell signals.
These two sites yield a wealth of info regarding the general topic of technical analysis:
Stockcharts.com - http://stockcharts.com/school/doku.php?id=chart_school
Incrediblecharts.com - http://www.incrediblecharts.com/technical/indicators.htm
Who is Ted Warren?
T.W. wrote How to Make the Stock Market Make Money for You. It was first printed in 1966 and then reprinted several times in the mid '90s. He was a firm believer in a technical approach to stock investing, and his book is a very interesting read. I have read it at least three times and got something from it each time I read it, and I have heard the same from several others that have read it.
What makes the Ted Warren method of investing different from other technical analysis methods?
Patience. I would say that is one of the main different reasons. Most other technical analysis sites I have seen look primarily at timeframes of days, weeks, or months or sometimes a few years. T.W. considered timeframes of several years. The other main difference I have noticed is that there is a strong emphasis on trading volume. Some technical analysis methods do not even consider trading volume let alone use it as a main factor.
How well does this method work?
As well as any other successful method works - 60-80% of the time. No method works 100% of the time, if it did then there would only be one method people would use and everyone would be wealthy. the best an investor can hope for is that their method of choice will work 60-80% of the time. Thus, the "wins" more than cover the "losses", and in the long run, the account value increases. Take a look at my historical data to get real life data.
Why use this method?
The advantage of this method is that instead of hoping for a gain of few dollars on a $30 stock, it looks for stocks that have the potential to increase 100-300%. Even though it typically takes 1-5 years for this gain to take place, it still leads to annualized gains typically in the range of 20-60%. Take a look at my historical data to get real life data.
Why technical analysis over fundamental?
Simple - it works better for me personally, it suits my personality. I am a scientist and looking at charts and finding patterns is something that I am fairly good at. Fundamental analysis is better suited for others like my uncle. He has traded the stock market successfully for over 25 years using a fundamental approach -- it works well for his personality.
What got me started and what is my background?
In 1998, I realized that I would probably not see a dime from social security (I didn't pay a lot into it to begin with because of a career change a few years after entering the work force). At the time I was a high school chemistry teacher and there were rumors of the teacher retirement system possibly having funding problems as well. Therefore, I decided to take care of my retirement myself through saving and investing. I noticed that mutual funds don't really perform much better or worse than the stock market in general over the long run, so I decided to invest in individual stocks. I tried the fundamental approach and invested my small amount of funds at the time in 5 different stocks that I had researched. A year later, 3 had gone down, 1 had stayed about the same, and 1 went up. That's when I decided that the fundamental approach wasn't gong to work and started studying technical analysis, and eventually, I found Ted Warren's book. It took me about 2 years and thousands of charts to really start getting the hang of it. From 2000 to present, I have had overall success and have been attaining the "magical" 60-80% success rate. Yes, that means sometimes I invest in a stock and it doesn't go up, and sometimes it even goes to zero. However, this is no different than any other method of investing, and my "wins " more than cover these relatively small losses. Currently, I am a registered investment advisor in the state of Montana, and plan to add other states as needed.
Email: contact(at)aiastockadvice.com
