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It has been stated many times that is not important where you enter a trade, but where you exit that really counts.  This is very true in the fact that entry points can be profitable anywhere, if you get out at the right time.

 

Using technical analysis to mark your exit points will make your trading strategy that much more accurate.  Good stop losses will make it much easier to reach your trading goals and stop the hazardous cycle of drawdown and instruct you to improve your trading.

 

Below horizontal support

 

It would be foolish to place a stop loss right at a horizontal support line.  Chances are that the security will bounce off the support line and continue upward slightly.  Many new traders, in an attempt to be ultraconservative, will place their stop losses right on top of horizontal support.  Horizontal support is one of the strongest support lines so putting your stop loss directly on the line makes simply zero sense.

 

Oscillator support

 

When the oscillators, such as the MACD or RSI, are reading very low numbers, it would be wise to place your stop loss closer to the current price.  The chance that a new wave of momentum will carry the price higher is greater, and thus, assuming more risk on a less risky investment would increase your chance for larger losses.  Technical analysis oscillators are very good at picking bottoms; use them as a way to gauge future support areas.

 

Between a gap

 

Gaps are often underestimated for their power.  Strategies for gapping up work very well on the regular charts, as do strategies for gapping down.  Gaps usually represent horizontal support, even though they might work with slanted trendlines.  Placing stops below a gap will lessen the chances of becoming stopped out, which will inevitably improve your trading.

 

200 period moving average

 

The 200 period moving average works very well as a support and resistance line.  Arguably, the most used moving average and possibly technical analysis indicator, the 200 day moving average works very well with the basic trading fundamentals.  If the price is above the 200 day moving average, anticipate plenty of support after a massive drop.

 

Bollinger bands

 

If you don’t use Bollinger bands for any other purpose than support and resistance, you’re still getting your money’s worth.  Bollinger bands, even in the default setting, are great as support and resistance due largely to the numbers of people who use them.  Placing a stop loss below the current bottom Bollinger band line is a good way to protect yourself from an untimely exit.  Indeed, Bollinger bands are one of the ideal technical analysis assets available.

If you take a closer look at fundamental analysis you will find that it has a lot to do with supply and demand. This is because analysis is used as a term to describe the different factors in supply and demand and how they are affected by one another. But beyond that, the analysis is something that is used to determine where a business is going and how well it is doing.

This does have a lot to do with supply and demand, but can also have a lot to do with other fundamental information. This fundamental information that is part of analysis includes financial reports, non-financial information, estimates of growth of demand, industry comparisons, the effects of new regulations and economy wide changes. A lot of times this information in fundamental analysis is compared with technical analysis to get the most out of both.

Those looking to invest in a company will be the most likely to use fundamental analysis. This is because the research is used to not just look at the value of the company, but to look at the company itself. This includes the results of its finances and it’s potential to grow. The fundamentals can give a superior picture the entire company, not just a snapshot. This means that analysis is used to look at the long term of a company not just the short term.

The most common way that fundamental analysis is done in is in three steps:

1) The first step to this type of analysis includes looking at the macroeconomic situation. This includes GDP, growth rates, inflation, interest rates, exchange rates, productivity and energy prices.

2) The next step taken in analysis in this category is looking at the industry as a whole. This includes total sales, price levels, competition and their effects, foreign competition as well as any entrances or exits from the industry.

3) Last in this process of studying the fundamentals includes looking at the company individually. This includes looking at unit sales, prices, new products, earnings and any chance of debt or equity occurring.

You can either use this procedure as a top down one or a bottom up one. It just depends if you begin with the individual company, the bottom up option, or the reverse, known as the top down analysis.

As you can see there are many aspects involved with carrying out good analysis of the the fundamentals of a company. But the basics are pretty simple to understand. Fundamental analysis is an invaluable tool for those who run businesses or are looking to invest in one. This is because it is healthy to look at the larger picture and give a fuller view than other older methods. This is bound to be the ideal intent if you are looking for the most information.