It needs to be pointed out that as more people are participating in the market any attempt to predicate every action on chart rules , the affect that accumulates can cause fluctuations to occur which may take all chart techniques and make them virtually useless.
You have a lot of company if you’re a chartist . Thousands of others are 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 . In particular , having many chartists place their stop loss orders at points that are identical , can actually make various formations like false penetrations of trend lines occur . Charting is a science that proves to be at least somewhat inexact, even for people who have a stock technical analysis course under their belts .
You can make the choice what scale the chart is on and whether the mid-price or closing price is used . In order to plot movements of price, both can be distorted . Usually the latter is used most often , but since it happens at the end of the day it is associated with a lot of profit-taking etc . Moreover , dynamic and unforeseeable events may play havoc with charts .
Charting is to some extent a lazy approach . The sheet of paper with a neat looks appeals to many who are weaker. Those who don’t have time or liking to go further . Many like to believe that it’s a better idea to look at all the wiggle-waggles . As there is a spread of technical analysis and more decide to take a stock technical analysis course, it can actually defeat the purpose it has , especially in a market that is “thin” .
You must understand that if enough traders are going with chart interpretations that are usual for a specific commodity, it will influence the price of that commodity in the track the prices are expected to move by chartists . 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 . No chart formation is completely reliable . Confirmation must be sought from various other indicators by chartists, like business cycle variations, changes in year to year production , and changes in quantifiable sums like commodity prices , reduce to one figure in summary to register all the diverse activities .
There are many times a commodity ends up going contrary to considerations that are fundamental because of technical factors and more. To succeed the chartist must be ready for thorough study and hard work and develop experience . It is an art because of its skill and the finesse and experience of the technician . These are without doubt the essential ingredients of profitable trading . Checking and re-checking must be done by the technician.
Another weakness from charting is from the idea that while the speculator knows all the commodity situation facts the same facts are known by many others who are professionals .
However, truthfully some events can occur without prediction and all traders are affected . These occurrences may not have totally discounted prices , and chartists may be caught unawares and there is very little left that can be done to keep your position protected except being alert to catch these trend changes quickly and to be quick to act . (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 . It is a fact of life that prices aren’t dictated by past performance when fluctuating, although P&L charting can give you a good idea on a daily basis .
Most systems are indictable when it comes to advisability because there is no track record . Any approach must be regarded as unprofitable until it has proved otherwise . To tell the truth , there isn’t much available evidence that is objective to support all the rules that come with chart analysis. Quite a few chartists try to foresee trends. This is a fallacy . People can’t assume upon a trend that is non existent. In attempting to utilize a trend following method , you must wait until the trend has been demonstrated . Even then, the motto a chartist needs to have is that a trend continues until it stops . Yet again, he attempts figuring out the direction of a trend reversal as it happens. It doesn’t work . Only as it occurs can you become aware of a new trend that is evolving . Most technical systems cannot anticipate a trend or trend reversal .
If unexpected moves happen , starting all over is what happens to mot technicians. After a series of discouraging losses , quite a few traders just abandon technical studies because they never work . Because this happens on a regular basis, it is further proof that short cuts don’t exist to trading success 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 .
Only in congestion areas are you protected because the congestion area defines you’re projection of losses . Even in congestions prices will fluctuate. Using a technical approach that tries to take congestion areas and analyze them , and therein a trading method comes into being, will provide the trader (and his broker through lots of commissions) large profits, as commodity prices are in congestion , more than 85% of the time in one form or another.
The main problem that novices and professionals both deal with is when to get in and out of the market . On this basis , a stock technical analysis course will help you learn that technical analysis has to a large degree encompass the short term price fluctuations ( Once again pointing to P&L charting).
