Different Trading Methods Learned with a Technical Analysis Course

Never in my life have I seen something like all the methods which are coming on stream for the use in forecasting commodity prices . There are many approaches and techniques . This chapter will present rather briefly, but a few .

There are some that are standard and those I use personally I'll put an asterisk beside. In this chapter alone there are 36 mentioned ways of price forecasting . This doesn't consider all the wonderful glorious little 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 don't know of any 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 portrays the evolution of a trend or congestion , often in just a day . )

Actually, I'm frustrated by traders that think that their weighted moving averages, volume oscillator, resistance index, balance volume, and who knows what else, - cash, basis , - are the only system which is effective. And, that the system that they are using is the one system that is going to be effective 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 . ( Okay . I was able to get that out.)

These traders often do not even use their own systems and seem to me, at least , to be continually fighting the market . Assuming a trader has studied 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 is one trader you can listen to. In the section on planning , this author will succinctly portray his approaches to the market place and you may get surprised at the flexibility of the author.

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

1. fundamental
2. mechanical
3. technical

FUNDAMENTAL

Often the market goes in the opposite direction of the fundamentals 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 . Fundamental traders may deny this, but there are just too many external factors to be taken into account , like fundamental influences and their natural response , reflected in the fluctuations day by day . So there's no need to seek them out for analysis .

MECHANICAL

Methods that are mechanical 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

Learning from 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 help predict the right trading time . A computer uses the mathematical formula and tells you what it thinks that you should do . One of the beauties of the mechanical method is that back checking can be done. Computer oriented methods is usually biased toward the analysis of a mathematical trend, using different trading systems, such as moving averages. 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 , much work has been done to give means of tools that are technical, - all aiming to anticipate futures prices from the statistics of trading , e.g. price, volume, O.I .

When it comes to the technical approach, there are four different areas.

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

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

* a. high/low/close bar charts daily
* b. the method of point and figure
* c. the average that moves of the prices at closing


Technical analysis lists of various approaches can be put on the list by these technical approaches .

* 1) reading of tape or board
* 2) price charts being analyzed - which includes



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



* 3) open interest and volume analysis
* 4) various indicators that are technical which can include :



* a. measure of the relative performance
* b. periodic price performance study
* c. study of opinion and contrary opinion


This will be discussed 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 www.drummondgeometry.com website.