No, not surely. It would be like driving with one eye on a map. Itās a map of the past, has all sorts of unhelpful squiggles on it and your not even sure if itās if the country you are in.
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Or studying the previous yearās football results without taking into account any variable other than the final score. Itās astrology for people with multiple monitors.
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So a sudden influx of volume over the course of a few weeks tells us absolutely nothing? Or how about when a stock breaks out of a 3 year resistance level and then rockets in price over the next month?
That is usually because the market is aware of that key price level. Itās not a magical coincidence. If so many people in the market are looking at the same reference points, it must have some impact, no?
Plenty of fundamentalists use moving averages as a rough guide to how the market is performing.
Iām not saying be elitist - Iām saying a balanced approach can only be a good thing.
It tells us lots of people are trading, this is useful but trying to plot this on a graph and guess where it is going next is next to useless.
āResistanceā levels are reading tea leaves. A skill early humans mastered was that of pattern recognition. It was very useful to make mental shortcuts to think faster than your prey. You can see patterns everywhere if you look for them, Jesus in a piece of toast?
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Yes, itās called apophenia.
I get you have a strong opinion, and I completely agree that a stock chart is useless at predicting anything at all - it can only give a picture of what is happening right now. I.e. If a chart can alert me that the Nasdaq is suddenly crashing, that is useful information which I can use to buy, sell or rebalance. People also use charts to figure out where to set limit orders to buy and sell.
If charts were completely useless, then why does Freetrade bother to display a chart at all?
Lots of people on here seem to think technical analysis is all just squiggles. Itās true that it canāt predict the future, but Iād argue there can be some value in analysing the past. You arenāt just looking at random lines on a graph, That line represents the aggregate opinion of all market participants. All of whom have/had access to the same fundamentals.
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I think there is a lot of guff on both sides. Oh people did they due diligence did they, and the executive team is amazing? By what metric, exactly?
Same with technical analysis, itās a head and shoulders breakout with extensive dandruff formations, is it? But then, there is some useful information, which is largely sentiment based, which may be predictive, and forms the basis of momentum as a factor.
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To try to answer the original question, when is the right time to sell? Itās when you have a better use for the money. Is there a better investment? Do you need to buy a yacht?
Iām glad thereās at least one person around here who understands that charts are useful for decision making.
Itās also worth noting that algorithms (which make up 60-75% of overall trading volume) operate based on charts, volume, moving averages etc.
For example, when a large financial institution enters a significant position in a stock it will invariably execute that trade using volume weighted average price (or time weighted average price, or percentage of volume) - sometimes over one day, sometimes over multiple days or weeks.
Volume weighted average price is a moving average which relies on a chartās price movement and volume to calculate when to execute a trade.
Add that to the big picture and a chart can provide extremely relevant information as to what the activity / demand or lack thereof is.
Charts are useful for reaction, NOT prediction - but thatās exactly what this thread is about - when
to sell (a reaction) - which is where a chart obviously provides useful information.
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Hang on, youāve moved the goal posts there. Algorithmic trading is not on the basis of lines draw on a chart. Itās done on the basis of a large number of variables and computed and executed as quickly as possible, the total programming of which there may be no one person who understands it all. This is absolutely not the same thing as a chart with lines drawn on it that a retail trader might have access to, interpret and then later act upon.
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My point being, a lot of the movements that make up a chart (60-75%) are algorithms - executing trades based on chart, price and volume with buy and sell rules based on moving averages.
So knowing that, itās quite easy to see why charts behave in certain ways sometimesā¦ i.e. a sudden sell off below a 50 day moving average.
If Iām in that stock when that happens, that information may or may not help inform my own decision. I may say āItās suddenly selling off on huge volumeā¦ might be time to trim my position back and take some profits while I have themā.
This sounds like a great way to lose to a computer. If you have some edge where you can make predictions and beat these systems, I would encourage anyone to either do this full time with your own capital and make bank or sell your services for extortionate rates to the trading houses. I couldnāt possibly do either, and have no desire to watch anything that closely. Itās a low validity environment so I donāt think I could gain expertise either.
Iāve basically only made costly mistakes when I have tried to time anything.
Iām not sure Iām happy that youāve attempted to set my position as that of someone who doesnāt think past data or any analysis. There are thousands of data points available I just rank āsentimentā & āresistanceā in the same part of the list as planetary movements.
@bitflip said it best, the reason for taking the counterpoint in this discussion is that new investors think this is some hack to beat the markets.
The code that quants write for high-frequency traders, and continue to tweak on a daily basis, is guarded with such high security that nobody knows all the inputs. It is true that some will account for technical analysis, after all some people trade on this. It is much more likely that theyāre built to front run trades, spot abnormal volumes & weight thousands of pieces of real world information.
But there are simple buying algorithms that are standard industry benchmarks, such as volume weighted average price, time weighted average price and percentage of volume. Itās no big secret, theyāre the tools of the trade for investment firms.
If an institutional investor wants Goldman Sachs to buy 500,000 shares of XYZ, they need to know theyāre getting filled at a good price. If the range for that period is 560-600, and Goldman Sachs gets them filled at 600, thatās a crap price. However, if they get them filled at just below the volume weighted average price for that day (say 575), they got a good deal. Thatās common knowledge.
Iām also not saying itās a way to ābeat the marketā or āpredict the futureā, Iām just saying a chart can provide useful information when combined with fundamental analysis. I donāt think thatās outlandishā¦ itās just a balanced approach.
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Looking back (Which, I know, nobody should ever do) nobody was talking about predicting anything.
Weāre talking about when to sell a stock.
Somehow it has developed into a tirade against stock charts 
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Probably now. Winter is comingā¦
Yes, you are 100% correct my interest here was to make sure that new investors realise that moving averages, resistance level, past peaks etc etc are not a way to outwit the market or make good decisions about buying or selling. If your decision panned out - well yeah random events occur.
There is an interesting and quite famous paper by Hoffmann and Shefrin Technical Analysis and Individual Investors Journal of Economic Behavior and Organization which using Dutch investors concluded:
Overall our results indicate that individual investors who report using technical analysis are disproportionately prone to have speculation on short-term stock-market developments as their primary investment objective, hold more concentrated portfolios which they turn over at a higher rate, are less inclined to bet on reversals, choose risk exposures featuring a higher ratio of nonsystematic risk to total risk, engage in more options trading, and earn lower returns.
this updates the results of Lewellen, Lease, and Schlarbaum (1980) āPortfolio Design and Portfolio Performance: The Individual Investorā, Journal of Economics and Business (I think based on US investors) which concluded
Technical analysis severely degrades the performance of individual investorsā portfolios.
I donāt follow this sort of research work anymore - so donāt know much about recent follow ups but I understand that there are several. I donāt get surprised with the adherents of ātechnical analysisā as basically you need very little training to do it largely because it is not ātechnicalā. It is obviously compelling to some people ā¦ lots of jargon ā¦ much like āintelligent designā so you can think you are doing clever things. I think that @House makes a salient point in When is the right time to sell? - #43 by House 'you are not even sure if itās in the country you are in". There is quite a lot of depth in that seemingly simple statement.
I go back to the beginning: As a new investor your time is more profitably spent trying to understand the company you are interested in, the general business area or even better stick with a core world index as your mainstay long term investment.
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I donāt think the importance fundamental analysis is being disputed. Thereās no question - Itās essential. Itās THE most important factor in investing.
I love fundamentals. Wouldnāt touch a stock without them. Had some for breakfast. Return on equity, price to book, price to sales, debt to equity, free cash flow. Delicious.
You appear to be taking this as some kind of fundamental vs technical debate - which it isnāt.
It doesnāt have to be strictly one road or the other. And lest we forget, this thread is about when to sell, not how to invest.
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No I am not.
What I donāt understand is how you can recommend reading āA random walk down wall streetā but believe in outperforming through technical analysis? 
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