Stalking the Stock Market

By Yoav Avinur

A practical guide to technical analysis and trading rules for trend following traders.
This essential, focused and effective guide is dealing with the basic concepts and tools of technical analysis with the intention to teach readers how to effectively recognize the highs and lows of the stock market and how to make buying and selling decisions accordingly.

• Language: English
• Publisher: Lulu.com
• Release date: May 8, 2014
• ISBN: 9781312174429

Book preview

Stalking the Stock Market

Stalking the stock market

First Edition

Copyright © 2014 by Yoav Avinur

All rights reserved.

ISBN: 978-1-312-17442-9

No parts of this book may be reproduced

In any form or by any means,

Without permission in writing from the publisher

Creative Commons

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Preface

Stock market trading is one of the most comfortable and accessible investment routes available to everyone, from the small-time investor to the large-scale investment managers. Stock market allows any to invest in nearly any financial area, immediately and in any sum. The only problem is that every financial market fluctuates in an incomprehensive way to most investors and traders, including those whose titles are professional investment managers. This is why many investors and traders often find themselves losing time and again instead of profiting as they buy high-priced financial assets when the market is hot and euphoric and sell them at a loss when the market crashes in panic. This irrationally behavior of investors and traders has been extensively studied and was officially recognized when Professor Daniel Cahanman received the 2002 Nobel Prize for economics for his groundbreaking studies together with Professor Amos Tverski (who died before the prize was given) in the field of behavioral economy. Cahanman and Tverski showed in their research that decisions to buy and sell are not rational, contrary to classic economic assumption. A typical example of irrational behavior is avoidance of selling an asset at a relatively small damage in order to postpone the experience of psychological pain caused when one realizes a theoretical damage to turn it into an actual damage. Investors are put through torments in a declining market until they can’t stand the pressure and sell at a greater loss, only to find in retrospect that they had done so just before the market began to rise again, since the moment the last of the tormented investors gave in and sold, the market was rid of its potential sellers and potential buyers regained control.

An additional industry upon which the stock market relies upon is that of immediate necessities’ satisfaction. You are guaranteed a brief class is all it takes to start trading and immediately earn hundreds of dollars per trading day, just like those smiling people in the ad. You don’t even have to quit your day job, just send selling and buying orders during lunch. What you’re not told is that in high leveraged trading, the small waves on the chart turn quickly into a drowning tsunami surge. As far as I can understand it, the only ones able to make this kind of trading successful are investment companies operating computerized trading tools with smarter and fast algorithms. A human trader wishing to profit from leveraged trading needs to be glued to their computer screen, and even then their chances are slim. To those who wish to feel the surge of adrenaline coursing through their body, I recommend the nearest roller coaster, as its cheaper and more fun.

I wrote this book in order to teach readers how to effectively recognize the highs and lows of the stock market and how to make buying and selling decisions accordingly. What I can’t teach anyone is patience. Whether genetic or acquired, patience is a quality without which we could never succeed in any aspect in life, especially the stock market. The ability to patiently wait long weeks and months at times to the arrival of a good buying opportunity and then to patiently wait for a big profit sale differentiates success from failure. Even if one fully mastered the entire methodology presented in this book, one will not be able to successfully realize it without patience. Say I’d offer each of you a single deal in each calendar year, but one that yields a 20% profit on your investment, would you make do with that single deal or would you have insisted on doing many transactions with less profit per each? (remember: the more transactions you make, the more commissions you pay as well). Those of you who understood what this question is all about, is already on the right track.

Dozens and hundreds of books regarding the field of technical analysis have been written over the years, and so I never intended on writing yet another encyclopaedia, but to make do with writing a short, focused and effective guide dealing solely with the concepts and tools needed for the trade method I offer. I assumed the most basic concepts of the stock market such as financial asset, stock, market capitalization statistics, etc., are familiar to the reader, or they can make up missing information through the various knowledge bases currently found online. I personally recommend my readers the websites: StockCharts.com – chartschool, for a further read on basic concepts in the field of technical analysis and Investopdia.com for additional read on basic concepts in economics and the stock market.

Admittedly, it’s much more enjoyable to read and write about what Gordon Gecko (the protagonist in the movie Wall Street) and Jordan Bellfort (The Wolf of Wall-Street) then read and understand chart technical analysis. I’ll predict that some readers may get bored and even experience difficulties initially reading the technical descriptions accompanying the charts. You have to make an effort in order to overcome this psychological stepping stone, as if you can’t read and understand chart technical analysis comfortably sitting in your own living room, how will you be able to do so in real