1. Shortlist the stocks based on the fundamentals, future potential, moat etc. I will apply technical analysis only to this list. Wont buy anything outside this list, even if the technical analysis says its is a screaming buy.
2. I am very bad at technical analysis. But we get the summary verdict (sell/buy/neutral) based on oscillators and momentum indicators easily in several sites. I will use this as the input. The plan is to use 1 day interval.
3. For sell/hold decisions, I wont rely on technical analysis verdict. ( Unless there are some fundamental based issues).
4. For buy/entry decisions, rely on the technical analysis verdict. This is the toughest part. Because it may not factor in the trend reversal. So we may end up buying at the peak. To overcome this, what are some of the key parameters to give more importance to? ( I mean among the momentum and oscillator parameters used in the verdict, such as moving average, RSI, ADX etc)
Can someone help me with the point 4?
I do think it is worth using technical skills to audit non price data however. Much less sexy but more valuable. P/E, FCF and all that.
The thing worked for me, is the simple concept of Support and Resistance and Dow theory ( Higher high, Higher low all that shit.) . So let's say there is a certain point or a range after which , it usually bounces back . That's the support and I would buy at that range.
One more logic here was, let's say a stock is trading at 50. It's support is at 48. I can afford to lose 100$ in this trade. So I would get 50 shares at 50$. If it goes below 48. I will take my loss of 100$ . Exit that position. It's more about calculated gambling
The consensus seems to be that technical analysis doesn't work. However, we don't have to commit to that very categorical statement, and we can work within a much weaker framework:
Even if various aspects of technical analysis could work in theory, they are too hard to get right for a single trader who is trying to wrangle it alone on his laptop. If it worked, then to get it right you still need a team of PhDs, and infrastructure, and computing clusers, etc. etc. So, forget it.
If you are worried about paying too much, or you are worried that you will miss out an opportunity, then learn how to use options to solve those problems for you.
My approach now for long term investing is to auto invest monthly into 5-6 index funds w low fees, aka Bogelheads. Simple, low stress. Dollar cost average on auto-pilot.
Also, set aside a nice chunk of cash to invest during the next crash.
The premium for short-dated puts gives you some bounds about which the options market thinks the underlying will move, and I’ve been able to improve my entries in effected issues by 5-8% in terms of price (before fees for options).
It’s effectively a limit order that you can’t cancel, with potential upside if the puts expire worthless.
P.S. I have never regretted that I've missed out on 1% return as long as the return is in my range of 18+%