Trading and Analysis

Technical Analysis

In contrast to a fundamental trader who looks to news and myriad supply/demand data as trading inputs, a technical trader gets information directly from the market itself by looking at one picture—a price chart. And, technicians operate on the assumption that past price movement can predict the future direction of prices.

Technicians believe that history tends to repeat itself. Thus, technical buying and selling often creates a self-fulfilling prophecy. So, whether you are a technical trader or not you must be aware of the power and influence of technicians when trading or investing in the futures markets. Technicians create opportunities.

Technical analysis is an art not a science. Consider two people looking at the same painting. Each may see or interpret the painting as having two very different meanings or messages. In the case of charts, you can think of the market as the artist and each technician as a critic. Unlike fundamentalists who pick and choose the inputs and data that they deem as critical, all technicians look at the same picture, the same snapshot, the same chart at all times.

Technicians rely on three basic types of charts:

1.Line chart
2.Bar chart
3.Candlestick chart

Line Chart

The line chart plots market closing prices. This chart provides an excellent picture of long-term trends. However, the trading range during a time period is often important information for a technical analyst, so line charts are rarely used for in-depth technical analysis.

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