Technical Analysis Course – The Weakness of Charting

It’s important that you notice that as more people are participating in the market any work to chart and predict each action , the accumulative effect of those similar actions self-creates price fluctuations which can end up destroying all of the various chart techniques .

If you are involved in charting, you’re not alone. Thousands of others are charting all the same things you chart . So, when there’s the signal of a major move , you are liable to have a lot of the same orders as yours hitting the trading pits . Particularly , stop loss orders being placed at the very same points by many chartists, can create false formations to occur. Charting is a science that proves to be at least somewhat inexact, even for people who have a technical analysis course to fall back on .

You can use on the chart scale used and whether the closing price or the mid-price is what you use. To plot price movements , either can be distorted . The latter is the most often used , but as it comes at the end of the day 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 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. Most people like to think it is more productive to look at all the variations. As there is a spread of technical analysis and more and more people take a technical analysis course, it can actually defeat the purpose it has , especially in a market that is “thin” .

It is important to realize 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. While a pure chartist does not wish to know a thing about fundamentals , a trader that is wise will try to use both strategies for futures trading . There is no 100% reliable chart formation . One must seek confirmation from other indicators , like business cycle variations, changes in year to year production , and deviation in commodity prices or any other quantifiable sum , brought down to a single summary figure to show all the activities.

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

Another weakness 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.

However, truthfully certain events can occur unexpectedly and affect all traders . prices may not have totally discounted these happenings, and chartists may be caught unawares and not much can be done to keep your position protected except to be alert to recognize sudden change in the market trend and to act fast. ( Think about a hurricane that takes all the oranges out to sea).

Technicians are famous for making spectacular profits one week and then lose big time the next week . The facts are that prices don’t change according to their performance in the past , although you do get some idea on a day to day basis with P&L charting .

The advisability of most systems is indictable because there is no track record . Each approach has to be looked at as unsuccessful until it has proved otherwise . To be upfront about it, there is very little objective explicit evidence available to support all the rules that come with chart analysis. Quite a few chartists try to foresee trends. This is a falsehood . People can’t assume upon a trend that is non existent. 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 chartist needs to have a motto when it comes to trends which is that a trend continues until it stops . Once again , he tries to figure out the trend reversal direction 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 a move occurs that is unexpected , most technicians have to begin again . After going through a string of bad losses , many traders have abandoned their technical studies since they don’t actually work. As it is a fairly common phenomenon , it is further proof that short cuts don’t exist to trading success and nothing substitutes for hard work, knowledge, and good experience .

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 this area helps to define the loss projections. Prices fluctuate in congestions . Using a technical approach that tries to take congestion areas and analyze them , and evolves a trading method therein , will provide the trader (and his broker through lots of commissions) huge profits , since commodity prices happen to be in congestion , one form or another 85 % of the time .

The universal problem known to the professional and novice alike is when they need to get in or out of a market. Due to this, a technical analysis course will help you realize that technical analysis must to some degree encompass the short term price fluctuations ( Yes, another good plug for P&L charting ).

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