Basic questions on investing

[sharanbr]

Hi All,

I am new to stock investing though I do investment through mutual funds.
I am not totally new to trading and I have done trading on and off earlier.

I have some basic questions on investing:

Before I get into specific questions, some background first
I am doing stock technical analysis. I have picked up few stocks for this and trying to experiment by putting some money and learn
from this ...

1) from technical charts, I am able to see support and resistances but there are multiple lows and highs.
How does one arrive at tentative support and resistance. Is there a thumb rule or it is just a gut feeling?

2) assuming, i have arrived at support and resistance values, should i trade with support value slightly lower then support I have arrived at.
For example, if support is 100, should I invest with a stop loss of say 95 or slightly above 100?

3) if stock moves lower than the stop loss then should i wait for it to cross some threshold or I should immediately sell?

4) How should I take into account macro factors. For example, recently when I traded, the market fell due to some trade war fears.
My basic analysis hasn't changed. So, how should I react in such situations when I know for sure that the market will recover almost with a guarantee?

Thanks for your patience.

 

[NVP]

hey S

firstly - investing is not the same as trading .......so you need to be clear what you are doing here ...take look at investopedia or similar to get the distinctions

we are traders here mainly ............. and my take on below .....I do trade stocks (since 1980s) but my speciality is forex so please excuse my comments if you feel they are not relevant to your field.....


1) from technical charts, I am able to see support and resistances but there are multiple lows and highs.
How does one arrive at tentative support and resistance. Is there a thumb rule or it is just a gut feeling?

go for the bigger S/R levels that are more obvious on higher TFs ......the higher the more relevant they are

2) assuming, i have arrived at support and resistance values, should i trade with support value slightly lower then support I have arrived at.
For example, if support is 100, should I invest with a stop loss of say 95 or slightly above 100?

try to place stops with decent wiggle room ............markets will try to shake you out .........personally im a fan of using ATRS as calculators for Stops .......then adjust profit targets accordingly ......so 1.5 ATR may be a decent Stop level .....or perhaps the last significant S/R behind the entry point .....yuor call

3) if stock moves lower than the stop loss then should i wait for it to cross some threshold or I should immediately sell?

you will have sold !!! ..............the stop loss will trigger it .........always have a stop loss ......dont ever ever trade naked and unprotected .....you will pay for that in the end otherwise (trust us)


4) How should I take into account macro factors. For example, recently when I traded, the market fell due to some trade war fears.
My basic analysis hasn't changed. So, how should I react in such situations when I know for sure that the market will recover almost with a guarantee?

the market is always right .........if the market fell and triggered your stop loss (see 3 above) then dust yourself off and welcome to trading ........basically if you feel you know the trend of the market find a good place to enter and go in again ......

and if yuo want guarantees .....then buy a dishwasher with a warranty ..........the only guarantee in trading is that the market is always right ! ..........traders must thrive on uncertainly ...........many people cant get this ....i have had many excellent and intelligent students that just cannot accept when the market does not do what they want and is "illogical"

being a trader is really hard ......mentally .......its much much harder than investing ....which leads us nicely back to my opening comment

good luck ....
N

 

[sharanbr]

hey S

firstly - investing is not the same as trading .......so you need to be clear what you are doing here ...take look at investopedia or similar to get the distinctions

we are traders here mainly ............. and my take on below .....I do trade stocks (since 1980s) but my speciality is forex so please excuse my comments if you feel they are not relevant to your field.....


1) from technical charts, I am able to see support and resistances but there are multiple lows and highs.
How does one arrive at tentative support and resistance. Is there a thumb rule or it is just a gut feeling?

go for the bigger S/R levels that are more obvious on higher TFs ......the higher the more relevant they are

2) assuming, i have arrived at support and resistance values, should i trade with support value slightly lower then support I have arrived at.
For example, if support is 100, should I invest with a stop loss of say 95 or slightly above 100?

try to place stops with decent wiggle room ............markets will try to shake you out .........personally im a fan of using ATRS as calculators for Stops .......then adjust profit targets accordingly ......so 1.5 ATR may be a decent Stop level .....or perhaps the last significant S/R behind the entry point .....yuor call

3) if stock moves lower than the stop loss then should i wait for it to cross some threshold or I should immediately sell?

you will have sold !!! ..............the stop loss will trigger it .........always have a stop loss ......dont ever ever trade naked and unprotected .....you will pay for that in the end otherwise (trust us)


4) How should I take into account macro factors. For example, recently when I traded, the market fell due to some trade war fears.
My basic analysis hasn't changed. So, how should I react in such situations when I know for sure that the market will recover almost with a guarantee?

the market is always right .........if the market fell and triggered your stop loss (see 3 above) then dust yourself off and welcome to trading ........basically if you feel you know the trend of the market find a good place to enter and go in again ......

and if yuo want guarantees .....then buy a dishwasher with a warranty ..........the only guarantee in trading is that the market is always right ! ..........traders must thrive on uncertainly ...........many people cant get this ....i have had many excellent and intelligent students that just cannot accept when the market does not do what they want and is "illogical"

being a trader is really hard ......mentally .......its much much harder than investing ....which leads us nicely back to my opening comment

good luck ....
N

thank you so much. Much appreciated.

 

[sharanbr]

Hello NVP,

With regards to your answers above, I would like to clarify a few things.

1) if I am buying an stock then I can place order with a stop loss. This is valid for that day. So, what do I do that for the subsequent days as I already have the stock with me & I want to sell it if it goes below a certain value?
2) on the trading platform, i don't see any option to place an order that is valid for multiple days. So, it appears that everyday I have to activate a stop loss order (if that is feasible) so that when the price goes below my stop loss value

Let me know how this is handled?

 

[J_C_Anderson]

First of all it is important to mention that investing is mostly based on fundamental research rather than chart data. Investors use chart for two main purposes:
- confirmation of fundamental idea, and
- finding the entry point with the acceptable risk-reward ratio.

All important price levels should be confirmed with volume. Another point is that price level 100 is not just 100, but a range from 99 to 101 (or tighter/wider depending on particular stock and its volatility). You should take it into account while trading.

To place orders that would be valid for multiple days you need "GTC" feature (Good Till Cancelled) - such order would be valid for four months.