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Chart Problems as Described by a Stock Technical Analysis Course

 

It needs to be pointed out that as there are more and more market participants when they try charting out predicatively all the actions, 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 .

You have a lot of company if you’re a chartist . There are many others that are charting every move like you are doing. When a big move is predicted, there will probably be many orders out there similar to yours. In particular , stop loss orders being placed at the very same points by many chartists, 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 those chartists that have a stock technical analysis course to help them out.

You can use about the scale your chart is on and whether to use closing or mid-price on it . When plotting movement of prices , both can be distorted . The latter is the most often used , but since it happens at the end of the day it is associated with a lot of profit-taking etc . In addition, dynamic and unforeseeable events may play havoc with 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 . 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 becomes more poplar and many begin taking a stock technical analysis course, this can defeat its purpose, especially in a market that is “thin” .

You must understand that is many traders are trading a commodity using usual chart interpretations , the price of the commodity will be influenced in the course chartists are expecting the prices to go . Their own theories can be proven right by them . Although pure chartists don’t want to know 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 changes in production from year to year, variation in business cycles , and deviations in sums that are quantifiable, such as commodity prices, brought down to a single summary figure to show all the activities.

In many cases a commodity goes totally opposite of basic considerations due to a variety of different factors . To become successful chartists must be ready to do a lot of work and study and to become experienced . It is an art because of the technician’s finesses, skill, and experience. These are without doubt profitable trading basic ingredients for success . Checking and re-checking must be done by the technician.

Another problem of charting comes from the thought that while the speculator knows all the commodity situation facts the same facts are known by many others who are professionals .

In reality, however, some events can occur without prediction and affect all traders . prices may not have totally discounted these happenings, which can catch chartists off guard and little can be done to protect a position in such a situation except being alert to catch these trend changes quickly and to be quick to act . ( 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’s just a fact 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 .

Most systems and their advisability are indictable because of the absence of a track record . Each approach has to be looked at as unsuccessful until proof shows otherwise. To be upfront about it, there’s little actual evidence out there to support the commonly accepted rules of chart analysis . Quite a few chartists try to foresee trends. This is a falsehood . You can’t recognize or even assume a non-existent trend . When trying to use the following method to utilize a trend , one must wait until the trend has demonstrated itself . Even then, the chartist needs to have a motto when it comes to trends which is that a trend continues until it stops . Again , he tries to figure out the trend reversal direction as it happens . This is impossible . Only as it occurs can you become aware of a new trend that is evolving . Most of the technical systems aren’t able to predict trend reversals or trends.

When a move occurs that wasn’t expected, 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. Because this happens on a regular basis, it offers more proof that there are no short cuts to trading success and no substitutes for experience, knowledge and hard work .

The fact that prices fluctuate is all we know for sure , but we don’t know how much they’ll fluctuate .

You’re only protected in congestion areas because this area helps to define the loss projections. In congestions, prices 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) glorious profits , as commodity prices are in congestion , one form or another 85 % of the time .

The main problem that novices and professionals both deal with is when they should get out of and get into the market . Due to this, a stock technical analysis course will help you learn that technical analysis has to a large degree encompass fluctuations of price that are short term (Another plug for P&L charting ).

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This entry was posted on Saturday, February 27th, 2010 at 12:53 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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