Technical Analysis Course - A Close Look At Charting And How Weak It Can Be
It needs to be pointed out that as more people are involved in the market any workto chart and predict each action , the accumulative effect of those similar actions self-creates price fluctuations which can end up destroying all of the various chart techniques .
If you are involved in charting, you're not alone. Thousands of others are charting every move like you are doing. Thus when a major move is signaled , you are liable to have a lot of the same orders as yours hitting the trading pits . Particularly , the placing of stop-loss orders at identical points by hundreds of chartists , may create false penetrations of trend lines and other formations . This means that charting is a science that is in some ways inexact , even for people who have a technical analysis course to fall back on .
You can use on the chart scale used and whether the mid-price or closing price is used . To plot price movements , there can be a distortion to either. The latter is the most often used , but as it comes at the end of the day a lot of profit taking and more is associated with it . In addition, chaos can occur to the charts because of events that are unforeseeable or changing.
Charting is an approach that is a bit lazy . To some weaker people, the clinical and neat look on a piece of paper is appealing . Who have no time or inclination to delve deeper . Most people like to think it is more productive to look at all the variations. As technical analysis spreads and more and more people take a technical analysis course, it will commence to defeat its own purpose , especially in a "thin" market setting.
You must understand that is many traders are going with chart interpretations that are usual for a specific commodity, it will influence the price of that commodity in the direction chartists expect prices to move . Chart followers are able to prove right their own theories. Although pure chartists don't want to know the fundamentals , a trader that is wise will try to use both strategies for futures trading . None of the chart formations are totally reliable. Confirmation must be sought from various other indicators by chartists, like business cycle variations, changes in year to year production , and deviations in sums that are quantifiable, such as commodity prices, reduced to a single summary figure to register all diverse activities .
In many cases a commodity goes totally opposite of basic considerations due to a variety of different factors . To succeed the chartist must be ready for thorough study and hard work and to become experienced . It is an art due to the finesse and experience and the skill of a technician . These are no doubt the essential ingredients of profitable trading . A technician has to check, and check again .
Another difficulty of charting comes from the thought that although all the facts of a commodity situation are known to the speculator other professionals and trading houses know these very same facts.
In reality, however, unexpected events can occur and all traders are affected . Prices may not have completely discounted these occurrences , and chartists may be caught unawares and little can be done to keep a position in this situation protected except to be alert to recognize sudden change in the market trend and to take action fast . ( Think about a hurricane that takes all the oranges out to sea).
Technicians are famous for making spectacular profits one week and then lose big time the next week . The facts are that prices will not fluctuate according to what their past performance dictates , but you can get an idea on a daily basis if you use P&L charting.
Most systems are indictable when it comes to advisability because there is no track record . Each approach has to be looked at as unsuccessful until proof shows otherwise. To tell the truth , there isn't much available evidence that is objective to support the commonly accepted rules of chart analysis . Trends are anticipated by various chartists . This is a fallacy . You can't recognize or even assume a non-existent trend . If you want to utilize a trend with the method following, you must wait until the trend has been demonstrated . Even then, the chartist's motto with regards to a trend is that a trend continues until it stops . Again , he tries to figure out the trend reversal direction as it happens . It doesn't work . Only as it occurs can you become aware of a new trend that is evolving . Trend reversals or trends can't even be anticipated by most technical systems either .
When a move occurs that wasn't expected, starting all over is what happens to mot technicians. After a series of discouraging losses , many traders have abandoned their technical studies because they never work . Since it occurs fairly often , it offers more proof that trading success has no short cuts and nothing substitutes for hard work, knowledge, and good experience .
All that is known is that there will be fluctuation of prices, but we don't know how much they'll fluctuate .
You're only protected in congestion areas since they define the projection of any losses . Even in congestions prices will fluctuate. Any technical approach that attempts to analyze congestion areas , and evolves a trading method therein , will provide the broker and trader huge profits , since there is congestion of commodity prices, one form or another 85 % of the time .
The main problem that novices and professionals both deal with is when they need to get in or out of a market. Due to this, a technical analysis course will help you realize that technical analysis must encompass to a considerable degree fluctuations of price that are short term (Another plug for P&L charting ).
by: Charles DrummondAbout the Author:Charles Drummond is a Canadian trader who has written nine books about trading and has created a technical analysis course called Drummond Geometry. His biography and further information about his work can be found at the technical analysis course website.