Technical Analysis Course – A Look at Various Methods of Trading

Never in my life have I seen something like all the 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. Within this chapter there are approximately thirty-six ways and means of forecasting prices . This doesn’t even include the various great tidbits that can be provided through a P&L charting 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 . There is no other system I know of where more than trend or congestion the activity of the day means more in which prices are trading . The activity of each day by using P&L charting shows congestion or trend evolution , often in just a day . )

However , this author is most irritated by those who believe that their moving average, point and figure, resistance index, volume oscillator, balance volume, weighted moving averages , and who knows what all else , – cash and basis, – are the one system that proves effective. And, that the system that they are using is the one system that is going to be effective and they don’t have a use for volume, open interest, seasonals, fundamentals, contrarian opinion, wave theories, point and figure, moving averages, oscillators, chart patterns, momentum indices, whatever , and are blinded to the approach of others . ( There . Now I got that out .)

Many times these traders don’t use systems of their own and at least to me it seems , fight the market all the time.  If you assume the trader has gone through a technical analysis course and has a forecasting method plan that puts together various methods and he puts them together in a way he can get trade profits on a regular basis , then this trader is worth listening to . In the section below that is on planning, the author will show his approaches to the market place and you will be surprised how flexible he is .

There are three basic methods to analyze the market behavior of commodity prices .

1. fundamental
2. mechanical
3. technical

FUNDAMENTAL

In some cases the market ends up going opposite of considerations that are fundamental due to factors like technical ones. Fundamental traders are interested in the price movements that are long range and need to be prepared to simply wait. Fundamentalists may deny it , but you must take into account too many external factors , like fundamental influences and their natural response , reflected in the day by day fluctuations . So for analysis, there is now reason to seek them out .

MECHANICAL

The mechanical methods use only price to determine what action to take and the trader doesn’t have to decide on the action. There are three mechanical methods .

1. chart
2. computer summaries
3. moving averages

Going through a technical analysis course will teach these rigid trading rules to be followed faithfully and in most cases it’s based on a formula that is mathematical to predict the right time to trade . 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 back checking can be done. Computer oriented methods usually bias themselves towards mathematical trend analysis ,using moving averages and other trading systems . The computer can be used as a chart reader and all of the decision rules can be both formulated as well as tested.

TECHNICAL

Over the past years , a vast amount of work has been done to give means of tools that are technical, – all aiming to anticipate futures prices from the statistics of trading , 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) analysis of character of market
• 4) structural theories.

Various methods for charting are available. Here are the most popular:

• a. high/low/close bar charts daily
• b. point and figure methodology
• c. moving average of closing prices

The list of approaches there are to technical analysis can be cataloged by these approaches that are technical .

• 1) tape or board reading
• 2) price charts being analyzed – which includes

• a. price trends
• b. support as well as resistance
• c. consolidation ( continuation and reversal )
• d. prices and the patterns and formations
• e. rules of measurement
• f. wave theory

• 3) volume and open interest analysis
• 4) various indicators that are technical including the following:

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

There will be more of this later .