It’s important that you notice that as there are more and more market participants any work to chart and predict each action , the affect that accumulates can cause fluctuations to occur which may take all chart techniques and make them virtually useless.
If you are involved in charting, you’re not alone. There are literally thousands of people charting exactly the same movements as you are . Thus when a major move is signaled , the trading pits will probably be hit with many orders just like yours . In particular , stop loss orders being placed at the very same points by many chartists, may create false penetrations of trend lines and other formations . Charting is inevitably to some extent an inexact science , even for people who have a stock technical analysis course to fall back on .
You can use about the scale your chart is on and whether the mid-price or closing price is used . In order to plot movements of price, both can be distorted . The latter is the one used more frequently, but since it occurs at the day’s end profit taking is often associated with it and more. Moreover , events that are dynamic or unforeseeable can cause mayhem with the charts .
Charting is to some extent a lazy approach . To some weaker people, the clinical and neat look on a piece of paper is appealing . Those who don’t have time or liking to go further . Most feel it’s more productive to look at all the variations. As there is a spread of technical analysis and more decide to take a stock technical analysis course, this can defeat its purpose, especially in a “thin” market setting.
You must understand that if enough traders are trading a commodity using usual chart interpretations , it can sway the commodity’s price in the course chartists are expecting the prices to go . Chart followers can prove their own theories right . Although pure chartists don’t want to know the fundamentals , a trader that is wise will try to use both strategies for futures trading . No chart formation is completely reliable . Confirmation must be sought from various other indicators by chartists, such as changes in production from year to year, variation in business cycles , and deviations in sums that are quantifiable, such as commodity prices, reduce to one figure in summary to register all the diverse activities .
Often the commodity goes completely contrary to fundamental considerations because of technical factors and more. To thrive 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 profitable trading basic ingredients for success . A technician has to check, and check again .
Another problem of charting comes from the thought that while the speculator knows all the commodity situation facts other professionals and trading houses know these very same facts.
In reality, however, unexpected events can occur and can affect every trader. These occurrences may not have totally discounted prices , in which case the chartist may be caught off-guard and not much can be done to keep your position protected except to recognize quickly these sudden changes and to act fast. ( Think about a hurricane that takes all the oranges out to sea).
Technicians are known to make a huge profit in one week and enormous losses the next . It’s just a fact that prices don’t change according to their performance in the past , although P&L charting can give you a good idea on a daily basis .
The advisability of most systems is indictable because a track record is lacking. All approaches have to be seen as unbeneficial until it has proved otherwise . To tell the truth , there isn’t much available evidence that is objective to support the commonly accepted rules of chart analysis . Many chartists tend to anticipate trends . This doesn’t work. You can’t recognize or even assume a non-existent trend . When trying to use the following method to utilize a trend , you have to wait until the demonstration of the trend has occurred. Even then, the motto a chartist needs to have that until it stops, a trend continues. Once again , he tries to figure out the trend reversal direction as it happens . It is not possible. 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 .
When a move occurs that wasn’t expected, starting all over is what happens to mot technicians. After dealing with losses again and again, many traders have abandoned their technical studies because they never work . Because this happens on a regular basis, it is further proof that there are no short cuts to trading success and no substitutes for experience, knowledge and hard work .
All we know for sure is that prices will fluctuate , but the amount of fluctuation isn’t known.
Protection is only available in those 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 therein a trading method comes into being, will provide the trader (and his broker through lots of commissions) large profits, since commodity prices happen to be in congestion , better than ¾ of the time .
The main problem that novices and professionals both deal with is when to get in and out of the market . Because of this , a stock technical analysis course should teach you that technical analysis has to a large degree encompass price fluctuations in the short term (Another plug for P&L charting ).
