Technical Analysis Course - The Weakness of Charting

Resistance Levels

It needs to be pointed out that as more people are participating in the market any attempt to predicate every action on chart rules , 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 . Thousands of others are charting exactly the same movements as you are . When a big move is predicted, 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, may create false penetrations of trend lines and other formations . Charting is inevitably to some extent an inexact science , even for those chartists that have a technical analysis course under their belts .

You can use on the chart scale used and whether to use closing or mid-price on it . To plot price movements , both can be distorted . Usually the latter is used most often , but since it happens at the end of the day a lot of profit taking and more is associated with it . Furthermore , chaos can occur to the charts because of events that are unforeseeable or changing.

Charting is an approach that is a bit lazy . 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. Most feel it's 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 will commence to defeat its own purpose , especially in a "thin" market setting.

It is important to realize that is many traders are trading a commodity using usual chart interpretations , it can sway the commodity's price in the course chartists are expecting the prices to go . Chart followers are able to prove right their own theories. Pure chartists never want to know all about the fundamentals, a wise trader will try to combine futures trading from both strategies . There is no 100% reliable chart formation . Confirmation must be sought from various other indicators by chartists, such as production changes each year, business cycle variation, 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 thrive the chartist must be ready for thorough study and hard work and to develop more experience. Charting is an art due to the finesse and experience and the skill of a technician . These are no doubt profitable trading basic ingredients for success . A technician has to check, and check again .

Another difficulty from charting is from the idea that although all the facts of a commodity situation are known to the speculator the same facts are known by many others who are professionals .

In reality, however, unexpected events can occur and can affect every trader. These occurrences may not have totally discounted prices , which can catch chartists off guard and little can be done to keep your position protected except to recognize quickly these sudden changes and to act fast. ( Such as all the oranges being lost to a hurricane ).

Technicians are famous for making spectacular profits one week and the next week take huge losses. It is a fact of life 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 . All approaches have to be seen as unbeneficial until proof shows otherwise. To tell the truth , there's little actual evidence out there to support all the rules that come with chart analysis. Many chartists tend to anticipate trends . This is a fallacy . One cannot assume or recognize a trend that does not exist . If you want to utilize a trend with the method following, you have to wait until the demonstration of the trend has occurred. Even then, the motto a chartist needs to have is that a trend continues until it stops . Once again , he attempts to anticipate the direction of a trend reversal as it evolves . It is not possible. You can only realize an evolving trend as it happens. Trend reversals or trends can't even be anticipated by most technical systems either .

If unexpected moves happen , most technicians have to begin again . After dealing with losses again and again, many traders have abandoned their technical studies because they just don't work . Because this happens on a regular basis, it continues to show that trading success has no short cuts and nothing substitutes for hard work, knowledge, and good experience .

The fact that prices fluctuate is all we know for sure , but the amount of fluctuation isn't known.

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 therein a trading method comes into being, will give the trader and the broker large profits, since commodity prices happen to be in congestion , more than 85% of the time in one form or another.

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 learn that technical analysis must to some degree encompass the short term price fluctuations ( Yes, another good plug for P&L charting ).