Charts aren't the final solution to making smart investment decisions. They don't provide all the answers but they are an important investment tool. If you are a serious investor you need charts as much as a plumber needs a pipe wrench. Sure, he could do his job without the proper tools but could he do it nearly as efficiently and effectively? And, if the tools are readily available, isn't it foolhardy to continue working without them?

Charts, and technical analysis, will completely change your way of relating to potential investments. They provide a filtering mechanism or framework for selecting investments that provide a good potential for profit.

Let me show you how very quickly.

Within minutes of looking at a price chart I can tell whether I'm interested in further information on a particular market or not. This saves me hours of wading through miscellaneous reports, analyses, trading tips, and newsletters. Once I've selected potentially profitable investments I plan my strategy according to sound principles, including fundamental analysis.

This business-like approach to investing may not offer the thrills of buying and selling on the spur of the moment but it does lead to greater profits and restful nights. You may be thinking, "I don't know what all the fuss is about. Investing boils down to simply knowing when to get in and when to get out."

You would be perfectly right; successful investing comes down to a matter of correctly answering these two questions:

If you've lost money on some of your investments you already know what all the fuss is about.

When to buy and sell can be solved by the use of a technical buy/sell checklist. This solves half the battle.

Three Simple Rules

Buy when the price is going up and sell when it is going down. Go with the trend. It sounds so simple, doesn't it? Yet, how many times have you purchased an investment without even considering the long term trend - the direction prices are headed? The price of a stock or commodity, any market for that matter, acts like a fully loaded freight train. Once a direction is established it becomes resistant to change. And the longer it heads in one direction the greater the momentum.

Day traders are in a category all their own, of course! (And they're usually the first to admit it!) The long term trend is relatively meaningless to a daytrader - however daytraders must still anticipate the direction of the trend no matter how short-lived or ephemeral. If you daytrade you just play by a different set of rules; the fundamental actions of the market don't change.

So, next problem, how can we confirm what direction the trend is going and when it has changed? We need a system that removes our emotions from the decisions, we might see what we want rather than what exists.

There are several forms of checklists, but they all follow the same principle. Martin Pring, a well known analyst, states the art of technical analysis is "to identify trend changes at an early stage and to maintain an investment posture until the weight of the evidence indicates that the trend has reversed." (Technical Analysis Explained by Martin J. Pring, 1991). Which is exactly what our checklist should let us accomplish, to answer three questions: when to get in, when to get out, when to stand aside.

Also is important to note that checklists should vary from trader to trader based on their trading style, risk level, time frame. The following checklist is for trading the longer term trend.

The point system in the checklist ranges from around +20 to -20, the higher the number, the stronger the uptrend (and further into the uptrend), the lower the number, the stronger the downtrend (and further into the downtrend). Sideways trends trend to have a static number range.

Rules to this checklist: