Technical Analysis Course – Understanding Charting and Its Weaknesses
It’s important that you notice that as more people are participating in the market any work to chart and predict each action , self created fluctuations in price can occur as an affect of all these actions which can end up destroying all of the various chart techniques .
As a chartist, you have lots of company . There are literally thousands of people charting exactly the same movements as you are . When a big move is predicted, you are liable to have a lot of the same orders as yours hitting the trading pits . Particularly , stop loss orders being placed at the very same points by many chartists, can create false formations to occur. This means that charting is a science that is in some ways inexact , even for those chartists that have a technical analysis course to help them out.
You can make the choice on the chart scale used and whether to use closing or mid-price on it . In order to plot movements of price, there can be a distortion to either. Usually the latter is used most often , but since it occurs at the day’s end a lot of profit taking and more is associated with it . In addition, events that are dynamic or unforeseeable can cause mayhem with the charts .
Charting in some ways is an approach on the lazy side. 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 becomes more poplar and more decide to take a technical analysis course, it can actually defeat the purpose it has , especially in a market that is “thin” .
It’s imperative to understand that is many traders are going with chart interpretations that are usual for a specific commodity, it can sway the commodity’s price in the direction chartists expect prices to move . Chart followers are able to prove right their own theories. Pure chartists never want to know all about the fundamentals, a wise trader will try to combine futures trading from both strategies . None of the chart formations are totally reliable. Chartists must look to other indicators for confirmation , such as production changes each year, business cycle variation, and deviation in commodity prices or any other quantifiable sum , reduced to a single summary figure to register all diverse activities .
Often the commodity goes completely contrary to fundamental considerations due to a variety of different factors . To become successful a chartist has to be ready for hard work and a lot of study and to develop more experience. It is an art due to the finesse and experience and the skill of a technician . These are all definitely profitable trading basic ingredients for success . A technician has to check, and check again .
Another difficulty from charting stems from the belief that although all the facts of a commodity situation are known to the speculator the same facts are known by many others who are professionals .
In reality, however, certain events can occur unexpectedly and affect all traders . prices may not have totally discounted these happenings, which can catch chartists off guard and little can be done to keep a position in this situation protected except being alert to catch these trend changes quickly and to take action fast . (How about a hurricane carrying all the oranges into the Atlantic ).
Technicians are known to make a huge profit in one week and then lose big time the next week . The facts are that prices don’t change according to their performance in the past , although you do get some idea on a day to day basis with P&L charting .
Most systems are indictable when it comes to advisability because a track record is lacking. All approaches have to be seen as unbeneficial until proof shows otherwise. To be upfront about it, there is very little objective explicit evidence available to support the commonly accepted rules of chart analysis . Trends are anticipated by various chartists . This is a falsehood . People can’t assume upon a trend that is non existent. If you want to utilize a trend with the method following, you must wait until the trend has been demonstrated . Even then, the motto a chartist needs to have is that a trend goes on until stopping . Once again , he attempts figuring out the direction of a trend reversal as it happens. This is impossible . You can only realize an evolving trend as it happens. Trend reversals or trends can’t even be anticipated by most technical systems either .
If a move occurs that is unexpected , starting all over is what happens to mot technicians. After going through a string of bad losses , many traders have abandoned their technical studies since they don’t actually work. Since it occurs fairly often , it is further proof that trading success has no short cuts and there is nothing that works better than experience, work, and knowledge.
All that is known is that there will be fluctuation of prices, but we don’t know how much they’ll fluctuate .
Protection is only available in those congestion areas since they define the projection of any losses . In congestions, prices fluctuate . Any technical approach that attempts to analyze congestion areas , and therein a trading method comes into being, will give the trader and the broker huge profits , as commodity prices are in congestion , better than ¾ of the time .
The problem that both professionals and novices deal with is when they should get out of and get into the market . On this basis , a technical analysis course will help you realize that technical analysis must encompass to a considerable degree the short term price fluctuations ( Yes, another good plug for P&L charting ).