If the COVID-19 pandemic has left you furloughed from work with no definite timeline for return, you are not alone, as thousands of Americans have seen their way of life turned upside down as the uncertainty wrought by the virus continues to linger.

With your $1,200 stimulus check likely long gone, you may be looking into some alternative ways to bring in money while you wait for the economy to get back up and running. 

One idea to earn some cash without ever leaving the comfort of your home is investing through the stock market. While the stock market has long been a superior means of generating wealth over time, the current climate wrought by the pandemic has likely eliminated the option of waiting, and you need to collect profits now. Fortunately, many experts have developed systems for generating hefty returns on money in short periods of time–even as little as one day.

While investing in the stock market will always carry some risk, proper market analysis can allow you to minimize this risk and capture the unmatched returns generated by the markets. While there is a limitless number of tools and indicators traders can use to optimize their profits, a basic understanding of two types of analysis–technical and sentiment–can help even the most novice traders understand the right time to buy low and sell high, pocketing substantial gains in the process.

Technical Analysis

Since the inception of the financial markets, fundamental analysis–assessing a security based on factors such as profitability, debt-to-assets, and price/earning–was the key to picking winning securities.

While these are still undoubtedly important factors to consider, they take too long to develop to be of much benefit to the Internet-based day trader. In addition, the explosion of big tech has changed what has traditionally been considered valuable fundamentals, and the volatility of cryptocurrencies makes fundamental analysis take a back seat in modern times when assessing a security.

In 2020, technical analysis is the key to an Internet day trader being able to capture profits in a short period of time. Very simply, technical analysis is the reading of charts, specifically the line graph of closing prices, to identify trends and patterns in a security’s price.

The great aspect of technical analysis is that the same principles apply to all tradable instruments–stocks, forex, and cryptos, to name a few. Technical analysis can help traders identify opportune buy and sell points, with some of the following examples of popular technical indicators and patterns:

  • Crab pattern – this is a reversal pattern, meaning that a security’s price direction is likely due for an imminent change in direction. These are shaped like a “W” or an “M” on the chart with the last leg of the “W” indicating a likely drop in price and the last leg of the “M” indicating a likely spike in price
  • Triangle pattern – this is a continuation pattern in which a security on a steady upward or downward trend pauses for a period of roughly 90 days of horizontal movement, forming a triangle from the trend lines from the high and low prices during this period. The security will likely “breakthrough” once the trend lines meet and form the apex of the triangle, continuing with the previous overarching trend direction

These are just a couple of the many patterns and indicators used by traders to make educated buy and sell decisions. As such, it is critical that aspiring traders be able to read charts to perform solid technical analysis.

Sentiment Analysis

In modern times, sentiment analysis gets more and more important to understand. Very simply, this is a measure of how investors feel about a certain security.

Factors such as a presidential tweet, public comments from a company’s CEO, or increasing foreign tensions are all factors that can greatly move a security’s price in the short term and must be closely monitored by day traders looking to make a profit.

Skylar Hammond is a writer for True Trader who specializes in topics such as stock trading, personal finance, and forex. He focuses on helping beginners and experts alike learn more about the market and improve their trading skills.

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