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Discussion of Different Trading Methods - Technical Analysis Course
By John | March 11, 2010
At no time have I seen something like all the methods that are coming out to use in commodity price forecasting . Hundreds or different approaches and techniques are out there. Only a few will be presented in this chapter briefly.
Some of them are rather conventional and those I use personally I’ll put an asterisk beside. In this chapter alone 36 ways of forecasting prices are shared. This does not take into consideration all the excellent tidbits that can be found with a technical analysis course.
(This author is very happy with P&L charting , for it enables this trader to quantify price action on a daily and intra-day basis . I know of no other system wherein each day’s specific activity means more than the trend or congestion in the way trading prices are going . With P&L charting every day’s activity shows congestion or trend evolution , in some cases, in a day. )
Actually, I become quite irritated by traders that think that their weighted moving averages, volume oscillator, resistance index, balance volume, and who knows what all else , - cash, basis , - are the only effective system . And, that the system that they are using is the only effective one and they never have any real use for seasonals, contrarian opinion, volume, oscillators, momentum indices, indices, other options , and are blinded to the approach of others . ( There . Now I got that out .)
Many times these traders do not even use their own systems and to me it seems, fight the market all the time. Assuming they have taken a technical analysis course and has a trading plan incorporating several methods of forecasting prices and combines them in a way which he can continually trade profits from the market , then this is one trader you can listen to. In the planning section , the author will portray his own market place approaches and the flexibility may surprise you .
You’ll find 3 basic methods used to help analyze commodity price behavior on the market.
1. fundamental
2. mechanical
3. technical
FUNDAMENTAL
Many times the market goes completely contrary to fundamental considerations due to factors like technical ones. Price movements in the long range are what the fundamental trader is interested in and have to be ready to wait . Fundamentalists may deny it , but you must take into account too many external factors , like fundamental influences and their natural response , shown in fluctuations that occur each day. So there’s no need to seek them out for analysis .
MECHANICAL
Mechanical methods use price and price alone to decide on the action they should use and the action doesn’t require a trader’s decision . There are three mechanical methods .
1. chart
2. computer summaries
3. moving averages
Learning from a technical analysis course will teach you to follow the rules of trading faithfully and it is usually based on some mathematical formula to help predict the right trading time . A mathematical formula is used by the computer, which tells you want to do. One of the great things about using the mechanical method is that you can back check it . Computer oriented methods are often biased towards trend analysis that is mathematical ,using moving averages and other trading systems . The computer can read charts for you and it can formulate and test any and all decision rules .
TECHNICAL
In the last several decades , a vast amount of work has been done to get technical tools in place , - all with the aim of anticipating futures prices from trading statistics , i.e. O.I., price, and volume.
When it comes to the technical approach, there are four different areas.
- 1) patterns of the price charts
- 2) methods of trend following
- 3) character of market analysis
- 4) structural theories.
There are many different methods for charting . The most popular are :
- a. high/low/close bar charts daily
- b. point and figure methodology
- c. moving average of closing prices
The lists of approaches taken to technical analysis can be put on the list by these technical approaches .
- 1) board or tape reading
- 2) analysis of price charts - which includes the following
- a. price trends
- b. support as well as resistance
- c. consolidation ( continuation and reversal )
- d. price patterns and formations
- e. the measurement rules
- f. wave theory
- 3) open interest and volume analysis
- 4) various indicators that are technical that may include :
- a. relative performance measures
- b. studying the periodic price performance
- c. study of opinion and contrary opinion
This will be discussed later .
Topics: Forex |
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