The 12 weeks to Christmas: Ebenezer Moosh

Thursday, 27th September 2012 10:07 - by Moosh

In my second series of blogs, I have a cross to bear...

The stock market is traditionally thought to be for those who only have large sums of money to invest – I guess my mission over the last four years is to attempt to use the power of the technical trend in order to prove (to myself!) that this does not have to be the case and that potentially anyone can feel as though they have a real chance of making gains in the stock market as a private investor.

My various chapters in the general chat section of LSE have ploughed through many trials and experiments and I am at the point where I am confident and comfortable, though not complacent. Every new investment I make is always new territory – I can never be entirely confident of whether a gain will be made, but I AM confident in how to react to and deal with price movements, be they positive or negative, and to stick to a tried and tested generic strategy that ignores the panic and frustration of the random private investor, even if only small amounts of capital are being invested.

So how do we progress from here? Allow me to assume the role of Ebenezer Moosh, a tight-fisted skinflint who likes to sit on cash. I want to invest, but the market makers (MMs) have to give me a reason to invest. While I can read the fundamentals of a company over and over again, I do still need to take a look at the technical analysis for timing of entry and exit according to my overall investment goals. It is only recently that I have begun to use a combination of volume oscillator (VO) and the Ichimoku cloud (also known as ‘kumo’) breakout and many of the following blog posts will use both of these to trigger entry points.

For a few years I have been obsessed with the slow stochastic oscillator (SS), but since using the VO and kumo combination I am finding the entry points based on these can occur when SS is overbought so it has taken a great deal of back testing the VO/kumo combination to make, understand, and be comfortable with the change, and I have to say, change is good.

Below are two videos explaining simply what both of these are and how they can be used. That’s the key – simplicity – technical analysis is not difficult to apply – the biggest obstacle for technical analysis comes from naysayers who just refuse to have an open mind to it. In spite of this, technical analysis is not going to go away. A lot of the indicators have been used for decades; the Ichimoku Kinko Hyo system was tested out by its Japanese creator for about 20 years before it was used for real – these things have been tried and tested. Obviously no system is perfect, but it’s then up to you to decide how you’re going to use them to your advantage – that’s YOUR choice to make, and you have to make that choice.

Volume oscillator video

http://www.youtube.com/watch?v=guaB2xHLsNI

Kumo breakout video

http://www.youtube.com/watch?v=Y3rv48ExtSU

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.