In last
posts I’ve been talking about technical analysis and how to survive the
markets, how to trade with the right mentality and another facts, the thing is
that we all get scared when the time of real trading comes and you look at the
right side of the chart especially when you open a trade and you start to think
outside of your system, you maybe find that you had a poor analysis or base to
open that trade, then as the market advance and the right side of the chart
moves and shows the truth you could be calmed as your position make any profit
or extremely scared as your trade shows a minimal lose.
Well the
first thing we must confront is that the chart never lies and it is as fair as
you can imagine, we cannot imagine a world where you watch your chart and it´s
moving on long movements and you wait for a short just because you think the
market´s going to move down, it will never be that way.
I say that the market
is fair because it prize the good, disciplined, humble and smart traders
account and destroy the amateurs, ignorant and not prepared traders, it is just
like that fair, it is as the life itself, you receive what you grow, if you
take $1000 of your pocket without a real training, not just that free e-book
that brokers give you for opening an account, you´ll probably end with a margin
call in less than a week, it could be less time, you´ll have more luck if you
bet that amount at a casino.
We´ll never
know what´s next, even with a hundred years of experience, even Warren Buffet
ignores what´s next, the thing is that we cannot predict the future, and I bet
that you have heard this more than one time, we get to work with what we have
now, analyze, measure, trade and hope to be right, but even the higher risk with
the best of the basis can result in great profits.
As
Alexander Elder said, the past is concrete and clear, the future is fluid and
not concrete, when you see the market is going out of your analysis, cut loses
and get immediately out of the market.
These are some techniques for making a basic
but effective prognostic of the future movements
- Analyze maximums and minimums, in a rising trend, higher maximums and lower minimums are a good sigh.
- Drawing Trend lines is the simplest, easiest and effective wait to find entry points in the chart, it has been the first indicator through the history and still effective.
- Using an Exponential Moving Average of at least 13 periods, the price over or under the EMA is a sigh of a trend.
- Indicators as MACD and Directional System will help to identify the trends.
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