Chapter 1 - Introduction

You are, by virtue of your visit to the Stock Trends website, a self-reliant investor who is looking for the right edge in your investment program. The right edge, of course, is usually measured by investment returns, but here we will generally refer to success in the stock market by the base motive that delivers those returns – profits! Not a dirty word. Your investment objective is to trade stocks profitably, and the mission of Stock Trends is to deliver the information you need to meet that objective.

Stock Trends is an analytical toolkit that allows investors to quickly scan through stock listings, categorizing price movements of individual stocks. It does this by defining a trend that relates the current price of a stock to its historical price. Rather than predicting stock price movements, Stock Trends reveals patterns and trends as they become apparent. Using Stock Trends, you can look for familiar patterns to determine when to buy and sell.

Finding value in the stock market

As a measure of value, the price of a good or service tells us something only when it is related to the price of another good or service, or to its price at another time. Something can be expensive or cheap only in reference to the price of something else. In the stock market there are many different ways of determining value. In fact, the investment industry devotes vast resources to defining and refining the concept of investment value. It is the research that fuels the industry. Billions of dollars worth of shares change hands on North American stock exchanges every year, and each trade represents investors' unending search for value.

The measure of value for each participant is mutable, variable, and unique. Information is the fuel that drives the market, but the uniqueness of each investor's measure of value gives the market its vitality. Two investors may have the same information in front of them but can act differently - either because they have interpreted the information in different ways, or they have established distinct degrees of risk they are prepared to face.

The Stock Trends approach

Stock Trends approaches stock evaluation from the branch of investment research known as technical analysis. As the name suggests, Stock Trends attempts to identify stock price trends as they reveal themselves. It does not predict stock movements, except in the patterns the trends imply. In other words, it identifies a trend, according to a strict definition, and lets investors make a link between how that trend evolves now and in the past.

It is important to understand that Stock Trends does not attempt to make valuations of the intrinsic value of a company’s stock. Instead, Stock Trends offers a systematic categorization of individual stocks based on the movement of stock prices. This analysis merely interprets what the market has to say about a stock – that is, it interprets the changes in the price and volume of a stock. In the mind of a market technician (another term for a technical analyst), the market knows best – and it delivers its verdict with every trading day. If we learn how to understand its message, trading profits can be delivered.

 

Next > Chapter 2 - History of Stock Trends

 

 Stock Trends Handbook - Contents