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How Long Should You Spend on Analyzing a Stock Chart

December 10th, 2013

Here's a question for you: How long does it take for you to purchase a vehicle?

Let's say I am buying your favorite ice cream – something that doesn't cost more than $5. Chances are, you take more time deciding to purchase a vehicle (compared to the ice cream), because it costs so much more.

You also don't understand the purchase as much. It isn't a ‘repeatable' purchase, because the car is new – new technology, new gimmicks, etc.

On the flip side, purchasing ice cream for less than $5 is a short process because it is something you're familiar with. It's a 'consumable' good that you are just looking to restock. The whole decision process could take you less than 10 seconds.

Analyzing a Stock Chart

The same principle applies to analyzing a stock chart…

If you have been watching Apple for the last 5-10 years, you have a good knowledge of how the company moves. You probably have good knowledge of how the company trades and what's going on with the stock chart.

It might only take you 10-15 seconds to figure out what's happening with the company if you spend every day looking at the chart.

On the flip side, if you are dealing with a brand new company, it may take you up to half an hour to really look at the stock chart, analyze it, see the trend, and get a feel for how it's moving.

Over-Analysis

You want to be careful not to over analyze – analysis paralysis...

Don't over analyze a stock chart (spending much more time analyzing than usual). Instead, scratch that chart, throw it away, and come back to it in a couple of days. You have a 33.3% chance of getting things right, so why force the trade?

If you're analyzing a new company, spend short moments analyzing. If you see it and feel comfortable with the trade – go for it! If you don't see the trend (the volume, price, action, behavior), then let it go.

I typically stick to the companies I know (10-20 I know very well). If I stumble upon new companies with great patterns, I trade them. Otherwise I let them go.

Don't take a chance with your money. Go with something that's consistent and you're comfortable with. That way you'll be more consistent with your trades and bring in the consistent profits.

Author: Sasha Evdakov

Sasha is the creator of the Tradersfly and Rise2Learn. He focuses on high-level education speaking at events, writing books, and publishing video courses on business development, internet marketing, finance, and personal growth.

I'm Sasha, an educational entrepreneur and a stock trader. In addition to running my own online businesses, I also enjoy trading stocks and helping the individual investor understand the stock market. Let me share with you some techniques & concepts that I used over the last 10+ years to give you that edge in the market. Learn More

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This website and content is for information purposes only as Rise2Learn, TradersFly, and Sasha Evdakov are NOT registered as a securities broker-dealer nor an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Rise2Learn, TradersFly, and Sasha Evdakov cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Rise2Learn, TradersFly, and Sasha Evdakov in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Rise2Learn, TradersFly, and Sasha Evdakov accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.