Guide to Fundamental & Technical Analysis

[Pages:236]Guide to Fundamental & Technical Analysis

TM

Guide To Fundamental & Technical

Analysis

?2010 Tigrent Brands Inc. All rights reserved. Tigrent Learning is a trademark of Tigrent Brands Inc.

10RDES0010 v1 2-10

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Table of Contents

Table of Contents

introduction: Essentials Of Success. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Keys to Your Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Now It's Time to Begin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Chapter 1: Getting Started. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Trading Based on Tips. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Trading Stocks We Know. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Getting Emotionally Attached. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Rationalizing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Taking a Loss and Minimizing Risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Always Have a Trading Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 The Five 5 Ts of Trading. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 1st T-Trade Identification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 2nd T-Trigger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 3rd T-Target. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 4th T-Tradable Instrument . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 5th T-Trade Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Establishing Trading Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 How to Develop Trading Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Goal Setting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Practice Trading. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Being a Disciplined Trader . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Guide to Fundamental & Technical Analysis

Chapter 2: Tools of the Trade: MachTrader Software. . . . . . . . . . . . . . . . . . . 31 MachTrader Software. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 File Button. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Tools and Help Button. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Pages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Charts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Adding Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Searching. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Seeker Modules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 How Often Should I Search? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Searching to Build a Watch List. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 How Big Should My Watch List Be?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Quote Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 News. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Fundamentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Option Chain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Spread Select . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Risk Graphs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Do I Need All of These Tools?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 How Do They All Work Together?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Chapter 3: Fundamental and Broad Market Analysis. . . . . . . . . . . . . . . 57 How to Approach Fundamental Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 How Do Fundamental and Technical Analysis Work Together?. . . . . . . . . . . . . 62 Fundamental Terms and Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 -Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 -Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 -Shareholder Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 -Earnings per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 -Price/Earnings Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 -Price/Earnings to Growth (PEG Ratio) . . . . . . . . . . . . . . . . . . . . . . . . . 64 -Market Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 -Shares Outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

Table of Contents

-Float . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 -Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 -Debt/Equity Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 -Return on Equity (ROE). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 Fundamental Scoring System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 What Does It Mean If a Score Is In the Middle of the Range?. . . . . . . . . . . . . . 69 Five Star Ranking System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Application of Fundamental Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 The Role of News. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Key Characteristics of a Good Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 When Reviewing Fundamentals of the Overall Market . . . . . . . . . . . . . . . . . . . 75 Bringing Individual Company Analysis & Broad Market Analysis Together. . . . . 77 Inter-Market Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Independent Financial Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 Commodities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Commodities and Policy Makers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Interest Rates and Commodities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Interest Rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Federal Funds Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Federal Funds Discount Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Prime Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Interest Rates and the Stock Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 Interest Rates and Bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Bonds and Stocks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Bond Market as a Leading Indicator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Currencies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 How the Forex Market Works. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 The Dollar and Commodity Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Pulling It All Together . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 How Does It Fit In with the Other Points of Analysis?. . . . . . . . . . . . . . . . . . . . 88 Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

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