Johndeo Research University

Stock Investing- Trend Following

Chapter I - Introduction

In the years that I have traded, there is one thing that I learned. The best technique in investing in stocks is to mix fundamental and technical analysis, with momentum.

You can't use price alone to find good stocks. How many times have you seen the price easily sliced into double tops or bottoms? I've been there also! We have lost a lot of money trading stocks by only using price. Whenever you find stock is breaking out, always remember to look for fundamental reasons why the price is moving.

Fundamental analysis cannot predict or create a signal on price movement. Have you seen a company drop 20% from the price after an excellent earning's reports? I know you have been there also, yet you still want to use solely the company's fundamental aspect.

Using momentum without a price and fundamental analysis can also lead to losses. A lot of traders always suffer from fake breakouts because the stock is ranging along over 70% of the time. Markets are fractal based on data, so whenever you see a sideways movement in a weekly time frame, it could be just a retracement in another time frame. In addition, how do you identify strong stocks?

Combining fundamental, technical and momentum is the key to finding goods stocks to buy especially for non-active traders.

Next: Chapter II - Fundamental Filters