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Archive for December 29th, 2009

It must be pointed out that as more people are participating in the market any attempt to predicate every action on chart rules , self created fluctuations in price can occur as an affect of all these actions which might destroy much of the validity of all chart techniques .

If you are involved in charting, you’re not alone. Thousands of others are charting every move like you are doing. So, when there’s the signal of a major move , there will probably be many orders out there similar to yours. Particularly , having many chartists place their stop loss orders at points that are identical , can create false formations to occur. Charting is a science that proves to be at least somewhat inexact, even for those who have a technical analysis course to help them out.

You can make the choice what scale the chart is on and whether the closing price or the mid-price is what you use. When plotting movement of prices , both can be distorted . Usually the latter is used most often , but since it occurs at the day’s end it is associated with a lot of profit-taking etc . Moreover , dynamic and unforeseeable events may play havoc with charts .

Charting in some ways is an approach on the lazy side. The neat clinical look of a sheet of paper appeals to the many weaker brethren . Who have no penchant or time to try to dig deeper. Many like to believe that it’s a better idea to look at all the wiggle-waggles . As technical analysis spreads and more decide to take a technical analysis course, it will commence to defeat its own purpose , particularly in a ” thin ” market .

It’s imperative to understand that if enough traders are trading a commodity using usual chart interpretations , the price of the commodity will be influenced in the track the prices are expected to move by chartists . Their own theories can be proven right by them . Pure chartists never want to know all about the fundamentals, a wise trader will try to combine futures trading from both strategies . There is no 100% reliable chart formation . One must seek confirmation from other indicators , such as production changes each year, business cycle variation, and deviation in commodity prices or any other quantifiable sum , reduce to one figure in summary to register all the diverse activities .

Often the commodity goes completely contrary to fundamental considerations due to a variety of different factors . To become successful the chartist must be ready for thorough study and hard work and to develop more experience. It is an art because of the technician’s finesses, skill, and experience. These are all definitely the essentials needed to trade profitably. The technician must constantly check and re-check .

Another problem of charting comes from the thought that although a commodity situation and its facts are know to a speculator the same facts are known by many others who are professionals .

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 there is very little left that can be done to keep your position protected except to recognize quickly these sudden changes and to take action fast . ( Such as all the oranges being lost to a hurricane ).

Technicians are well know for one week making huge profits and then lose big time the next week . It is a fact of life that prices will not fluctuate according to what their past performance dictates , although P&L charting can give you a good idea on a daily basis .

The advisability of most systems is indictable because of the absence of a track record . Each approach has to be looked at as unsuccessful until there is other proof . To be perfectly candid , there is very little objective explicit evidence available to support all the rules that come with chart analysis. Trends are anticipated by various chartists . This is a fallacy . One cannot assume or recognize a trend that does not exist . In attempting to utilize a trend following method , you have to wait until the demonstration of the trend has occurred. Even then, the chartist’s motto with regards to a trend  is that a trend goes on until stopping . Again , he attempts to anticipate the direction of a trend reversal as it evolves . This is impossible . One can only be aware of the new trend evolving as it occurs . Trend reversals or trends can’t even be anticipated by most technical systems either .

If unexpected moves happen , most technicians have to begin again . 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 nothing substitutes for hard work, knowledge, and good experience .

The fact that prices fluctuate is all we know for sure , but the amount of fluctuation isn’t known.

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 therein a trading method comes into being, will give the trader and the broker huge profits , since there is congestion of commodity prices, better than ¾ of the time .

The problem that both professionals and novices deal with is when to get in and out of the market . Because of this , a technical analysis course will help you learn that technical analysis has to a large degree encompass fluctuations of price that are short term ( Yes, another good plug for P&L charting ).

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