The Point of Charting and TA?!

Discussion in 'Technical Analysis' started by mytwocents, May 8, 2004.

  1. I suppose it goes without saying that I'm new to trading....OK, now here's what I'm not understanding. I realize that the point of the various charts and graphs is to predict trends...and to find resistance and support levels...right? And as far as it appears to me that's the ONLY find resistance and support levels...I must be wrong and totally missing something but is that what all these charts are for? All have the same purpose which is to find those levels?

    And furthermore, it seems to me like every chart is just backtesting...? Or if not that, I think it would be really helpful, at least for me, if someone had a step-by-step example of a trade they made using the charts. Or perhaps even a comparison of someone's charts that they actually used and then their backtesting charts?

    Ahhh......! All these charts?! Is the idea to use one chart to find the levels and then use the others to confirm it? Is that the idea?
  2. Your thinking is off the mark. No prediction is involved. Banish that word from your language. You position yourself to conserve capital.
  3. BSAM


    Buy a book.

  4. yes and no.
  5. have a look at dbphoenix thread on price & volume
  6. Lucrum


    IMO Bundle is right. Forget about trying to predict the unpredictable. And although some do successfully use them I'd also try not tp get too caught up in all those lagging indicators and oscillators. All they "indicate" is what has already happened, not necessarily what's going to happen.

    BSAM also has a point in his "buy a book" comment. There are some, including myself, that don't mind trying to help people who ask but trying to describe how to read and use price charts in the relatively small space of a post would be like trying to describe how to ride a bike in the same space.

    Here is a look at a chart and one of my favorite "setups". Keep in mind there are many different methods.

    Notice the third bar (green) after the 9:30 open on the 6th.
    Notice how it pokes above the trend line ( TL ) from below then drops back down and closes below the TL. That's a failure
    to successfully penetrate a potential resistance level which I view as a sell signal. I would sell short at the open of the next bar.
    I would place a buy stop order (stop loss) just above the green bar that penetrated the TL and either choose a profit target ( PT ) or use any of several trailing stop price methods in an attempt to milk the trade for all it's worth, often using a shorter time frame chart.

  7. Perhaps I should have stated before, but I'm interested in FOREX so while I really found db's info incredibly helpful, I find that I'm somewhat stuck because as far as I know, there aren't any volume indicators that take into account any trades OTHER than each firms OWN volume..... I'd love to apply the D & S methods but what do I substitute for the volume indicators?
  8. nkhoi


  9. omcate


  10. The point of charting is to two fold

    1 to provide a definitive, rule based trading approach

    2 to provide an intuitive feel for market action, from price action.
    #10     May 9, 2004