Stock Technical Analysis Course – The Weakness of Charting
It must be pointed out that as more people are participating in the market 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.
As a chartist, you have lots of company . There are literally thousands of people charting all the same things you chart . When a big move is predicted, you are liable to have a lot of the same orders as yours hitting the trading pits . 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 . This means that charting is a science that is in some ways inexact , even for people who have a stock technical analysis course under their belts .
You can use what scale the chart is on and whether the mid-price or closing price is used . In order to plot movements of price, there can be a distortion to either. The latter is the most often used , but as it comes at the end of the day a lot of profit taking and more is associated with it . In addition, chaos can occur to the charts because of events that are unforeseeable or changing.
Charting is to some extent a lazy approach . 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 wiggle-waggles . As there is a spread of technical analysis and more and more people 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 trading a commodity using usual chart interpretations , it can sway the commodity’s price in the direction chartists expect prices to move . Chart followers can prove their own theories right . Pure chartists never want to know all about the fundamentals, a trader that is wise will try to use both strategies for futures trading . No chart formation is completely reliable . One must seek confirmation from other indicators , such as production changes each year, business cycle variation, and changes in quantifiable sums like commodity prices , reduced to a single summary figure to register all diverse activities .
In many cases a commodity goes totally opposite of basic considerations due to a variety of different factors . To thrive chartists must be ready to do a lot of work and study and to become experienced . It is an art due to the finesse and experience and the skill of a technician . These are without doubt the essentials needed to trade profitably. A technician has to check, and check again .
Another weakness from charting is from the idea that although all the facts of a commodity situation are known to the speculator these facts are also known by large trading houses and other professionals .
In reality, however, certain events can occur unexpectedly and can affect every trader. Prices may not have completely discounted these occurrences , and chartists may be caught unawares and little can be done to keep your position protected except to be alert to recognize sudden change in the market trend 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 you do get some idea on a day to day basis with P&L charting .
Most systems and their advisability are indictable because there is no track record . Each approach has to be looked at as unsuccessful until proof shows otherwise. To be perfectly candid , 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 is a fallacy . You can’t recognize or even assume a non-existent trend . When trying to use the following method to utilize a trend , you must wait until the trend has been demonstrated . Even then, the motto a chartist needs to have that until it stops, a trend continues. Once again , he attempts figuring out the direction of a trend reversal as it happens. It doesn’t work . You can only realize an evolving trend as it happens. Most technical systems cannot anticipate a trend or trend reversal .
When a move occurs that wasn’t expected, most technicians have to begin again . After a series of discouraging losses , quite a few traders just abandon technical studies because they just don’t 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 .
All we know for sure is that prices will fluctuate , but we don’t know how much they’ll fluctuate .
Protection is only available in those congestion areas because the congestion area defines you’re projection of losses . In congestions, prices fluctuate . Any technical approach that attempts to analyze congestion areas , and evolves a trading method therein , will provide the broker and trader huge profits , as commodity prices are in congestion , more than 85% of the time in one form or another.
The main problem that novices and professionals both deal with is when they should get out of and get into the market . On this basis , a stock technical analysis course should teach you that technical analysis must encompass to a considerable degree fluctuations of price that are short term ( Yes, another good plug for P&L charting ).
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