Understanding Technical Analysis Of Stocks, Futures And Commodities
Understanding Technical Analysis of stocks, futures
and commodities can be a valuable tool in determining the trend of any market
and assisting with entry and exit levels for your trades.
The goal of technical analysis in the stock, futures or commodities market is
to help us determine when a market is trending, and when it is not. If a stock
or futures contract we want to trade is trending, then we want to be on board.
If it's not, all you are going to do is lose money as you get whipsawed around
day after day. This is not what we want as traders
If you trade using a weekly chart, all it takes is a couple of trends a year to make a lot of money
trading. If you trade something like that S&P Emini futures contract, using
a 3 minute chart, then you'll need one or two of these strong trends a day to do
well, but it's all relative.
Unfortunately, many people fight the trend and buy at every small up tick in
a down-trending market,
thinking they have picked the bottom, only to see the Stock or index fall further
immediately. By the time the sellers are finished, these traders have spent
their monetary and psychological capital in a futile attempt to pick the bottom
of the market.
Another common mistake traders often make is buying more as the price falls,
or averaging a loss. You can imagine how dangerous this strategy can be in a
strongly down-trending stock - it's something good traders never do. The trend is your friend, don't ever buck it.
Good technical analysis skills, especially in fast moving futures and
commodities markets, give us a mechanical indicator for price points to use for entries and exits and
take a lot of the guess work out of our trading. It is very hard to argue that
the trend is anything but down at any time if you are simply looking at a series
of consistent lower
tops and bottoms on your chart.
Does good technical analysis mean you'll always make money?
No, of course not. Losses on some trades are inevitable, as we cannot know for sure what the
market will do. It only takes one person somewhere in the world to
invalidate your perfect trade set-up and send the price of any market in the
opposite direction to what you were certain was going to happen.
All our analysis can do is alert us to probabilities - there are no
certainties in financial markets. This is the hardest thing for most traders to
accept. We all hate to be 'wrong', but that is the nature of the trading business.
All we can do is take every trade and see what happens. The better our
analysis and our trading system, the more likely our trades will produce profits.
Every one of us must learn or develop a system of analysis that we are comfortable with, based on what
we learn from other traders, mentors and coaches, and then we must take every trade that system signals.
we start to second guess our system, we may as well throw it away and just stick
with our day job.
Make a decision to develop or learn a technical analysis system you are happy
with, and commit
to taking 20 trade set-ups in your preferred stock, futures market or commodity no matter what.
Then follow your trading rules to the
letter. This will give you an objective measure of how profitable your system is
and whether it is right for you.
If you can enter a trade and hold a position, your plan is sound. If not, you may
be over-trading (have too many open positions for your account balance and your
personal temperament) and need to reduce the size of your position
or adjust your plan is some other way.
The large profits come from using a proven technical analysis method to
identify a strongly trending market and taking
multiple positions with that trend.
This naturally involves holding firm and not jumping out at the first sign
of trouble. Of course, you can only take what the market is prepared to give, so
a system of trailing stops is a good way to lock in profits as they accrue.
Bottom Line: Find a trading and analysis
system that's been proven to work from somebody who has been actually trading it
for a long period of time, have that person coach you through their system until
you can implement it flawlessly, then take every trade signal the system
produces regardless so you can test it's validity.
All great athletes, business people (and yes traders) have a mentor or role
model who they turn to for advice and guidance. Find one for yourself and your
results as a stock, futures or commodity trader are bound to improve.
Rocky Tapscott is a trader who works with Professional Emini Trading Coach Sam Goldberg. Sam has written a Free 5 day Mini Course called
'The Futures Trading Mastery Course' that shows you step by step how to become a professional trader by finding a mentor who will coach you to success.
U.S. Government Required Disclaimer - Commodity Futures Trading
Commission Futures and Options trading has large potential rewards, but also
large potential risk. You must be aware of the risks and be willing to accept
them in order to invest in the futures and options markets. Don't trade with
money you can't afford to lose. This is neither a solicitation nor an offer to
Buy/Sell futures or options. No representation is being made that any account
will or is likely to achieve profits or losses similar to those discussed on
this web site. The past performance of any trading system or methodology is not
necessarily indicative of future results.
CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE
CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO
NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE
RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN
MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL
ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF
HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO
ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
Copyright 2016 Futures Trading Coach
Trading Made Easy LLC
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.
ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADE PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF THE HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.