The few things one need to understand when screening stocks using the Financial approach is to ensure the company is GROWING and the INDUSTRY is growing. How do you know both the stock and the industry is growing? It is both using the past or historical data and trying to forecast (VOODOO) the future using the past!!!! That also cannot be 101% fool proof!!!! When you are satisfied that both the stock and industry is poised to continue growing into the future for indefinite period than you need to ensure the company is properly management and not a good candidate for failure. Who can guarantee the future will be like the past! It is as good as you are engaging the service of a fortune teller to tell you the future!!!
The charting technique is a complete different approach and overhaul the industry. The reason why charting approach becomes a joke of the town is due to many INCOMPETENT inexperienced people calling themselves "gurus" make forecast of the future with charts and failed miserably. These group of people are better off taking the textbook and repeat like a parrot to teach.
What are the criteria of a good, reliable and profitable trading system using charting technique?
1. Easy to interpret/understand/explain
2. Easy to replicate
3. Easy ... easy ... easy in all the aspects for a DUMMY to use!!!
4. The same template can be applied across all DIFFERENT time frames without the need to TWEAK and different templates for different time frames
5. The same template can be used for all different products.
6. The same template help you to map your potential RRR (RISK-REWARD-RATIO)
7. The same template ensure your entry TIMING is LRHR (Low Risk - High Reward)
Both Fundamental (financial) and Charting use the PAST to look into the future. There is nothing shocking about this truth. It is how one use the past to predict the future that differs!
To appreciate the charts, one should understand the word CYCLE. The duration of the cycle and the changes or developments within ONE cycle.
If you do not understand where the current PRICE position versus the overall cycle, than you have been walking along the wrong path!!!
It is only when you are able to identify your GPS, than you can make a wise educated decision.
From my 30+ years of trading with charts, I conclude that
a. The path from the start to the end of the journey is never smooth as straight line. There will be bumpy sections of the path with potholes in fact some of the time very harrowing.
b. We are driving along a highway that has different speed limits.
c. Sometimes it is better to delay starting the journey
d. Each cycle trend is NOT a replica of the past cycle. It can be similar in behavior but NEVER a replica in magnitude.
e. As long as your ENTRY TIMING is correct, price level is IRRELEVANT.
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