If you’re bullish on the DAX then you want to see price start to get above the 50 simple moving average on the weekly charts and to hold support. Then you’d ideally like to see price get above the 9 ema and hold for the bull market to continue. The problem is that is a lot of resistance to overcome. If price action can’t get above those resistance lines again then the bull run might be over with and we may be entering a bear market.

Bear markets aren’t very fun for the DAX or any type of long term investment strategies. We’ve had a couple of major ones over the recent years in 2000 and 2008, which wreaked havoc on the markets. This is why it’s important to understand candlestick patterns, trendlines, and how price action works, so you can be prepared with your investment strategies.

If your investments are in risky funds at the top of markets then there’s a good chance that you could give back a ton of your profits when the steep declines hit. This is where proper risk management strategies come in with your investment portfolio.

Warren Buffet has a saying to be fearful when other people are greedy and greedy when other people are fearful. What does this mean? When people get overconfident at the tops of markets and start buying at resistance levels, this is a great way to get trapped and caught of guard. Many of times traders take profits at resistance levels or news catches people of guard and panic selling ensues.

Also, the inverse is true. Many of times the markets sell off heavily and traders or investors get too nervous to buy. Warren Buffet provides good advice but it’s important to know how this all plays out in the real world. That’s why it’s so important to learn how to read the charts to be prepared. 

So, you need to be careful buying at the tops of markets, but also be careful trying to catch a falling knife as markets fall before they’ve reached support levels and have held.

Buy Low Sell High

The term buy low and sell high sounds good and is true but most investors don’t know how this plays out on stock charts. If you try to buy low as price is still falling and hasn’t found a bottom, this is very risky. Sadly, this is what happens to most traders and investors. They don’t patiently wait for reversals to take place. They listen to news or speculation and this is how they get burnt many of times.

Look for doji or hammer candlesticks on the charts. You ideally want to see theses candlesticks off major support levels on weekly and monthly charts off major moving average lines like the 50 and 200 sma. Once you see this happen, then you might look to go long at the breaks above these candlesticks but keep an eye on major overhead resistance levels such as the 9 and 20 ema. Just because a reversal takes place doesn’t mean it won’t reject at those levels again.

Learning technical analysis will be one of the most important skillsets that you can learn to protect your financial portfolio long term, and also profit from the corrections of the overall market along the way. The key is to be prepared and learn how to track the history of the DAX market and be ready.If you are researching stocks for fundamentals…we recommend StockRover to get the job done.