In my first article on Point and Figure (P&F) charting (That Figures), I discussed the basics of creating that style of chart. In this article, I will build upon that knowledge and show more advanced methods for identifying patterns and projecting price movement.
To paraphrase Newton's first law of motion, "An object in motion will stay in motion unless acted upon by an outside force." We see this all the time in nature (try jumping and gravity pulls you down), but did you know that it can apply to the markets as well?
Long before we had computers to chart price, traders were making a living and doing it by watching price movement.
In a recent class, the students kept asking me to explain how to locate and trade chart patterns.
Unless you have been hiding under a rock for the past year, you are aware of the dramatic rise in the price of gold and also its use as a safe haven for investors trying to escape the tumultuous markets.
In analyzing many new traders' performances, I have seen a disturbing pattern.
I want to reiterate that there is no one way to trade. That is what makes this so challenging and fun. We need to find a style that best suits us and create rules that we can follow and improve upon.
On January 12th of 2010, I wrote an article titled, "2010, Back to the Future?" In the article, I remarked at how the economic environment was starting to mirror that of the 1970's. We still have sluggish growth, high unemployment and some signs of inflation rearing up again. Even Big Ben is hinting that QE3 may not be too far away from reality
Many traders often ask me what the "Golden Cross" is. The actual definition of a Golden Cross is when a shorter moving average finally crosses a longer one, thus confirming a trend is intact
One of the indicators I use often is the Commodity Channel Index (CCI).
I have often told swing traders, if you are looking for clues to the probable direction of your stock, look to the major influences.
Moving averages are a part of many traders' analysis tools. A question I usually get from students is, "What period moving average is best to use?"