It needs to be pointed out 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 may take all chart techniques and make them virtually useless.
As a chartist, you have lots of company . Thousands of others are 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 . Charting is inevitably to some extent an inexact science , even for those who have a technical analysis course under their belts .
It is a matter of choice about the scale your chart is on and whether to use closing or mid-price on it . When plotting movement of prices , either can be distorted . The latter is the one used more frequently, but as it comes at the end of the day it is associated with a lot of profit-taking etc . In addition, dynamic and unforeseeable events may play havoc with charts .
Charting is to some extent a lazy approach . 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. Many like to believe that it’s a better idea to look at all the variations . As technical analysis becomes more poplar and many begin taking a technical analysis course, it can actually defeat the purpose it has , especially in a “thin” market setting.
It’s imperative to understand that is many traders are going with chart interpretations that are usual for a specific commodity, it will influence the price of that commodity 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 . 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 deviations in sums that are quantifiable, such as commodity prices, brought down to a single summary figure to show all the activities.
In many cases a commodity goes totally opposite of basic considerations because of technical factors and more. To become successful a chartist has to be ready for hard work and a lot of study and to develop more experience. This is an art form because of its skill and the finesse and experience of the technician . These are no doubt the essential ingredients of profitable trading . The technician must constantly check and re-check .
Another difficulty 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 .
However, truthfully some events can occur without prediction and can affect every trader. These occurrences may not have totally discounted prices , and chartists may be caught unawares and little can be done to keep a position in this situation protected except being alert to catch these trend changes quickly and to be quick to act . ( 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’s just a fact that prices don’t change according to their performance in the past , but you can get an idea on a daily basis if you use P&L charting.
Most systems are indictable when it comes to advisability because there is no track record . All approaches have to be seen as unbeneficial until it has proved otherwise . To be perfectly candid , there is very little objective explicit evidence available to support chart analysis and it’s common rules . Many chartists tend to anticipate trends . This doesn’t work. One cannot assume or recognize a trend that does not exist . If you want to utilize a trend with the method following, one must wait until the trend has demonstrated itself . Even then, the chartist needs to have a motto when it comes to trends which that until it stops, a trend continues. Again , he attempts figuring out the direction of a trend reversal as it happens. It is not possible. 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 unexpected moves happen , starting all over is what happens to mot technicians. After a series of discouraging losses , technical studies are often abandoned by traders since they don’t actually work. As it is a fairly common phenomenon , it offers more proof that there are no short cuts to trading success and no substitutes for experience, knowledge and hard work .
All that is known is that there will be fluctuation of prices, but we don’t know how much they’ll fluctuate .
Protection is only available in those congestion areas since they define the projection of any losses . Even in congestions prices will fluctuate. Any technical approach that attempts to analyze congestion areas , and when a trading method evolves , will provide the broker and trader huge profits , since commodity prices happen to be in congestion , one form or another 85 % of the time .
The problem that both professionals and novices deal with is when they need to get in or out of a market. On this basis , a technical analysis course will help you realize that technical analysis has to a large degree encompass price fluctuations in the short term (Another plug for P&L charting ).