Fundamental vs Technical Analysis

by Investopedia

The methods used to analyze securities and make investment decisions fall into two very broad categories: fundamental and technical analysis. Learn the core differences in these strategies and how to use each analysis effectively.

Ichimoku Cloud Trading Strategy

Even though the name implies one cloud, the Ichimoku Cloud is really a set of indicators designed as a stand alone trading system. These indicators can be used to identify support and resistance, determine trend direction and generate trading signals. Ichimoku Kinko Hyo, which is the full name, translates into “one look equilibrium chart”. With one look, chartists can identify the trend and look for potential signals within that trend.

Tenkan-sen (Conversion Line): 
(9-period high + 9-period low)/2)) </b> On a daily chart, this line is the mid point of the 9-day high-low range, which is almost two weeks.

Kijun-sen (Base Line): 
(26-period high + 26-period low)/2)) </b> On a daily chart, this line is the mid point of the 26-day high-low range, which is almost one month.

Senkou Span A (Leading Span A):
(Conversion Line + Base Line)/2)) </b> This is the midpoint between the Conversion Line and the Base Line. The Leading Span A forms one of the two Cloud boundaries. It is referred to as “Leading” because it is plotted 26 periods in the future and forms the faster Cloud boundary.

Senkou Span B (Leading Span B):
(52-period high + 52-period low)/2)) </b> On the daily chart, this line is the mid point of the 52-day high-low range, which is a little less than 3 months. The default calculation setting is 52 periods, but can be adjusted. This value is plotted 26 periods in the future and forms the slower Cloud boundary.

View Strategy Details Here
⇨ https://stockcharts.com/school/doku.php?id=chart_school:trading_strategies:ichimoku_cloud

Technical Analysis School: Support and Resistance

Support and resistance represent key junctures where the forces of supply and demand meet. In the financial markets, prices are driven by excessive supply (down) and demand (up). Supply is synonymous with bearish, bears and selling. Demand is synonymous with bullish, bulls and buying. These terms are used interchangeably throughout this and other articles. As demand increases, prices advance and as supply increases, prices decline. When supply and demand are equal, prices move sideways as bulls and bears slug it out for control.

Read more here:
http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:support_and_resistance

Technical Analysis Introduction

Technical Analysis Introduction, Tutorials and References

Introduction to Technical Analysis
- http://www.investopedia.com/university/technical/

Chart Analysis School
- http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis

Forex Trading School 
(most topics are applicable to stocks)
- http://www.babypips.com/school

Harmonic Patterns
- http://www.harmonictrader.com/price_patterns.htm

*Updated links can be found in the "Technical Analysis" section of this blog.

ION: Range Trade Play (Range trading lesson)

Ionics, Inc.

Range trading setup on ION.

Support zone = 2~2.1
Range trading band = 2~2.3 (can adjust the 2.3 upper band when using trailing stops, doing profit run, or depending on your risk level)

Trading Plan
- Buy/Accumulate at support zone (the closer to 2 the better).
- Sell near the upper band around 2.3 (initial TP).
- Stop-loss at 1.94 (can be adjusted depending on your comfort zone for the risk/reward ratio).

Notes
- Assuming you can get it around 2 and sell at 2.3, your risk/reward ratio is around 1:5 (a probability of winning 5 times the risk).
- Assuming you got it at 2.1 and sell at 2.3, your risk/reward ratio drops to around 1:1.25 (relatively higher risk but still doable if strictly implementing the tight stop).
- Alternative profit taking method is to use a step up TPs and use trailing stop to protect gains (set initial TP > once initial TP is hit, adjust stop-loss to break-even...and move up from there in TP steps).
- Another profit taking method is to profit run the rest of the position with trailing stop after initially taking profit at first TP (use percentage points on trailing stop just below the initial TP).

Potential result
- Using 2~2.3 trading band with 1:5 risk/reward ratio, the potential gain will be around 15% with the risk of losing 3% (excluding charges).
- With 1:1.25 risk/reward ratio, potential to gain 9.5% and a risk of losing 7.6% (excluding charges).

Remarks
- The trading plan above is just to demonstrate a logical approach to range trading and avoiding impulsive buying.
- Impulsive buying usually comes with indecisiveness when to take profit resulting in a potential gain that eventually turn into a loss (gain na sana naging bato pa).
- Stop-loss is there to minimize your risk (losses) and survive to trade another day. Avoiding a scenario of a short term trader that becomes a long term investor (dahil naipit).
- Higher risk/reward ratio insures that you will potentially remain profitable over the long run despite some bad trades hitting your stops.

Additional Notes
- Never let a winner turn into a loser.
- Risk can be predetermined but reward is unpredictable (never trade without a stop-loss).