It’s important that you notice that as more people are involved in the market any attempt to predicate every action on chart rules , the accumulative effect of those similar actions self-creates price fluctuations which might destroy much of the validity of all chart techniques .
As a chartist, you have lots of company . There are many others that are charting every move like you are doing. Thus when a major move is signaled , the trading pits will probably be hit with many orders just like yours . Particularly , 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 a science that proves to be at least somewhat inexact, even for those 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 . To plot price movements , either 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 in some ways is an approach on the lazy side. The sheet of paper with a neat looks appeals to many who are weaker. 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 variations . As technical analysis spreads and more decide to take a stock technical analysis course, this can defeat its purpose, especially in a market that is “thin” .
It is important to realize if a lot of traders are using the usual chart interpretations to trade a given commodity , it will influence the price of that commodity in the direction chartists expect prices to move . Chart followers are able to prove right their own theories. Although pure chartists don’t want to know the fundamentals , combining futures trading taking from both strategies is what a wise trader will try. 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 develop experience . Charting 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 weakness 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, truthfully some events can occur without prediction and all traders are affected . prices may not have totally discounted these happenings, in which case the chartist may be caught off-guard and there is very little left that can be done to protect a position in such a situation except to be alert to recognize sudden change in the market trend and to take action 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 will not fluctuate according to what their past performance dictates , 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 there is no track record . Any approach must be regarded as unprofitable until it has proved otherwise . To be perfectly candid , there isn’t much available evidence that is objective to support chart analysis and it’s common rules . Quite a few chartists try to foresee trends. This is a fallacy . People can’t assume upon a trend that is non existent. When trying to use the following method to utilize a trend , you must wait until the trend has been demonstrated . Even then, the chartist’s motto with regards to a trend that until it stops, a trend continues. Again , he attempts figuring out the direction of a trend reversal as it happens. It doesn’t work . One can only be aware of the new trend evolving as it occurs . Most technical systems cannot anticipate a trend or trend reversal .
If a move occurs that is unexpected , most technicians have to begin again . After going through a string of bad losses , technical studies are often abandoned by traders since they don’t actually work. Because this happens on a regular basis, it is further proof that trading success has no short cuts and no substitutes for experience, knowledge and hard work .
All that is known is that there will be fluctuation of prices, but the amount of fluctuation isn’t known.
Only in congestion areas are you protected since they define the projection of any losses . 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 give the trader and the broker glorious profits , as commodity prices are in congestion , better than ¾ of the time .
The universal problem known to the professional and novice alike is when to get in and out of the market . On this basis , a stock technical analysis course will help you realize that technical analysis must encompass to a considerable degree fluctuations of price that are short term (Another plug for P&L charting ).
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