Q. What should I follow, Fundamentals (like EPS, etc.) or Technicals (like trend-lines, oscillators, etc.) ?
Vivek : Stock Price moves on the basis of demand and supply for the stock. Technical Analysis studies the “effect”, i.e. the price, without wanting to know the “cause” of the price move. By the time the Fundamental cause of the price-move is known, it is usually too late for a profitable trade. One should, therefore, follow only Technicals.
Q. What is Wave Analysis ?
Vivek : Stock Price does not remain static. It moves, sometimes in “Impulsive” manner (making larger strides in shorter time) and other times in “Corrective” manner (consuming longer time without making much strides in magnitude). Wave Analysis is the study of the sequences of such Impulsive and Corrective moves on the chart, with time-tested rules that such sequences follows most of the time. Since Impulsive moves can be downwards, you can use wave analysis at all times, even for trading short
Q. How do I make profits using Technical studies ?
Vivek : Once trend is identified, remain with the trend. With the help of trend-lines, channels, retracement levels, etc., you can design your entry points during correction. Profits come when you trade long or invest on corrections during an uptrend and sell when the trend matures. Within a downtrend, you can also make profits by selling short on rallies.
Q. Why and Where should I keep a my Stop-loss ?
Vivek : Stop-loss is to be placed at a level that would confirm change in the trend that you are playing for.
Q. Is Technical Analysis meant only for short-term traders ?
Vivek : it is only a misconception that Technical Analysis is only useful for short-term traders. These tools, in fact, enable us to look much ahead in Future, examples of which are given in various presentations on vivekpatil.com