System of Interpretation and Procedures

Development of a system
In this we are going to expose a system that is based on the knowledge by obtaining from experimentation. The procedure of analysis has developed applying systematic and objective observation of multiple cases for a long time. Objectivity does not come about easily but it can be learned. One can become more objective as he becomes conscious of the personal prejudices and takes them into account. Through rigorous training, and through the observation of a number of cases, a system of analysis can be set out that is supported on statistically conservative bases. At first the beginner will enjoy detecting how the traffic of the price of a stock by the sub channels is, in some cases, almost perfect as it bounced below in the support line to then ascend up to its resistance line and do this several times. When this is discovered by him, then the temptation of waiting for the next bounce in the support line to buy will be irresistible. But be careful. There is not any guarantee that the price will not break the support line and speeds downwards before your unbelieving eyes. Unless we trace other reference lines that help us to stimulate the probability that the price will direct in the direction we are waiting for. The key of the system will consist in supporting the stock exchange view with points of reference of each stock that comes to view to the beginner analyst, by building a series of price time of a stock. The graph, at first, will look like a febrile curve with nervous oscillations on the plane, but it will not be known at first sight, which is the most probable direction of its evolution. The steps that need to be taken to draw reference lines to the series of drawn prices and which will be of great assistance are the following:
  • Draw the main channel of the stock for a period of at least one year of daily data.
  • Draw the sub channel by which the stock of the last period is moving in.
  • Draw the Bollinger bands, which will fix the limits of the oscillations of the cycles.

A good procedure of analysis should contemplate the following phases:

  • Detection of a stock that shows inertia to the raise to materialize its buy.
  • Establishment of the probable behavior of its cycle.
  • Emergency plan if the purchase signal is wrong.

Speculators in general spend a great part of their time analyzing the market trying to obtain the right entry sign but they do not dedicate time to the analysis of what to do if their analysis is wrong. They generally do not predetermine the point of grabbing of profit either.