Are Charts Essential When Buying And Selling Stocks?
When you first become interested in stock market investing, you will find that there are lots of tools at your disposal to help you find winning investments. You can use level two price data, you can use fundamental analysis to find financially sound companies, and you can look at price charts to help pinpoint your entry points.
It is actually price charts that I want to talk about in this blog post because I think every trader should at least be aware of how you can use charts buying and selling stocks. The great thing about price charts is that they are widely available, and although you can subscribe to a charting software provider, you can often get these charts free of charge.
For example if you read this Zecco review, you will see that streaming charts are available to you after you register an account. Indeed this is generally the case with virtually any stockbroker that you come across online.
If you go on to read other reviews, including this Trade King review, you will see that you don’t have to get your charts from any other website. You can simply go to the back office of your brokerage account and use their charts, which is very convenient.
So are these charts any good, and can they help you generate greater returns from your stock market investing?
Well I should emphasise that they are certainly not compulsory. Warren Buffett, for example, does not spend any time scanning through price charts when deciding what stocks to buy or when to buy. He will be more focused on the long term prospects of a company.
Of course he may look at price charts to see how the share price has moved in recent times, and whether or not it is trading at low levels. However I cannot believe he uses any indicators, like so many investors do.
I myself think that using technical indicators can be beneficial, but these indicators are better suited to short or medium term investors. For example if you are planning to sell your shares in a few months time, then it really does matter what price you buy the shares at and it may be in your best interests to purchase stocks when they are trading at bargain levels as indicated by certain technical indicators.
If you are investing for the long term, as is the case with Warren Buffett, then the entry point is not overly important. Providing that the company that has been invested in is boosting it’s earnings and it’s dividend payouts each year, then the price is likely to continue moving higher, so your original entry point is relatively unimportant.
So the message I want to convey is that price charts certainly have their uses when investing over weeks or months because timing is very important. However if you are holding on to your shares for the foreseeable future, then the charts may only require a very brief look before you make the decision when to buy.
90% COLLAPSE of Stock Market! Buffet ALREADY Sold Shares