Technical Analysis Course - A Look at Various Methods of Trading

Never in my life has something been seen like all these various methods that are appearing for use in price forecasting for commodities. There are many approaches and techniques . Only a few will be presented in this chapter briefly.

There are some that are standard and those I use personally I'll put an asterisk beside. Listed in this chapter 36 ways of forecasting prices are shared. This does not take into consideration all the wonderful glorious little tidbits that can be provided through a P&L charting technical analysis course.

(This author is very happy with P&L charting , because it allows the ability on a daily and intra day basis to quantify price action . I know of no other system where the activity of the day is more important than congestion or trend in which the prices are being traded. The activity of each day by using P&L charting can show the evolution of a congestion or trend, in some cases, in a day. )

Of course, , this author is most irritated by those who believe that their resistance index, moving averages, point and figure, volume oscillator , and who knows what else, - cash, basis , - are the only effective system . And, the system they use is the only one that will ever be effective and they never have any real use for volume, open interest, seasonals, fundamentals, contrarian opinion, wave theories, point and figure, moving averages, oscillators, chart patterns, momentum indices, whatever , and seem to be blind to approaches evolved by others. ( Okay . I was able to get that out.)

These traders often don't even use a system that is theirs and at least to me it seems , fight the market all the time. Assuming they have taken a technical analysis course and they have a plan for trading that combines various price forecasting methods and he puts them together in a way he can get trade profits on a regular basis , then this is one trader you can listen to. In the section below that is on planning, the author will portray his own market place approaches and you will be surprised how flexible he is .

In order to analyze commodity price behavior on the market, there are 3 methods .

1. fundamental
2. mechanical
3. technical

FUNDAMENTAL

Often the market goes completely contrary to fundamental considerations due to various factors . Fundamental traders are interested in the price movements that are long range and have to be ready to wait . Although they may deny it , but the external factors you have to consider are too many, like the response that occurs to influences that are fundamental, reflected in the day by day fluctuations . So for analysis, there is now reason to seek them out .

MECHANICAL

Mechanical methods use price and price alone to determine what action to take and the trader doesn't have to decide on the action. Three mechanical methods exist .

1. chart
2. computer summaries
3. moving averages

Going through a technical analysis course will teach that you should faithfully follow the trading rules and in most cases it's based on a formula that is mathematical to predict the right time to trade . A computer uses the mathematical formula and tells you what it thinks that you should do . One of the great things about using the mechanical method is they can be back checked . Computer oriented methods usually bias themselves towards mathematical trend analysis , using various trading systems, like moving averages . Your computer can become a chart reader and it can formulate and test any and all decision rules .

TECHNICAL

Over the past years , much work has been done to give means of tools that are technical, - all with the aim of anticipating futures prices from trading statistics , e.g. price, volume, O.I .

The technical approach from the simplest to the most complex and esoteric falls into four broad areas .

* 1) price charts and their patterns
* 2) methods that follow trends
* 3) character of market analysis
* 4) structural theories.

For charting, there are a variety of methods . The following are the most popular :

* a. bar charts for high/low/close each day
* b. point and figure methodology
* c. moving average of closing prices


The list of approaches there are 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. resistance and support
* c. consolidation ( continuation and reversal )
* d. price formations and patterns
* e. rules of measurement
* f. wave theory



* 3) volume and open interest analysis
* 4) other different technical indicators which can include :



* a. measures of relative performance
* b. studying the periodic price performance
* c. opinion survey and contrary opinion


There will be more of this later .


Author:
Charles Drummond is a Canadian trader who has written nine books about trading and has created a technical analysis course called "Drummond Geometry." His biography and further information about his work can be found at the technical analysis course website.