Technical Analysis Explained And Profit Targets Setting By 3 Different Methods
If ever or whenever you are doing a trade the question quickly comes out : How and when do you leave with a profit? Aiming targets has to be a very important element of your trading scheme, and this is the subject of the next article in our series Technical Analysis Explained.
Objects can be based on time (I’ll stay in the trade for 3 weeks ) or technically-based (I’ll keep making the trade until my slow moving average across my faster moving average) or based on profit (I’ll get out when I make the profit of 1000usd ), or price-based (I’ll get out of the trade when it get to my target price.)
Of the 3 methods each has some advantages and liabilities . Technical exits are always accessible and remove this part of personal judgment , but work well only in effective trends , cause losses in congestion , and nearly all the time leave much money upon the table . Time-based tools are useful at times but just mostly are net losers, and so shouldn’t be seriously taken as a solo tool . Found on profit exits are able to train a trader to take frequent profits but what happens when the trade continues far over your pre-planned exit point ? This violates the easiest rule of trading: run as soon as you win .
The greatest meaning of selling is to set aimed prices but only when these are good based in the market structure and reflect the market’s existing support and {resistance matrix}. If your plan of trading {takes into account} the natural support and resistance of the market then the aim of yours will be good and the chances of yours of remove all that the markets has is even more higher then with arbitrarily chosen, arranged dollar profit targets (which attend to be driven by emotion) or a technical moving average tool (which by defined obliged to leave a lot of money on the table ).
How will you set profit aims according to market structure instead of an arbitrary dollar objectives? For someone this is a difficult question but for the trader who has created the understanding of multiple time period structure and the ability to project current support and resistance levels forward in the future , pointing targets is easily finished . The first technique is to {use your higher time-period support} and resistance levels ( it should usually be one time-period higher than your trading time-period), and to set your target at the next logical assist or resistance level beyond the current price.
Technical analysis explained as follows: Say you are day-trading the S&P E-mini contract. You’re using a five minutes chart and take a position using your best entry tool . The market starts to move in your favor and since you have 5 contracts to put on a position you quickly accumulate a profit of 750usd. You are happy and desire for more and that makes you want to take profits fast , especially as you see in eyes a slight retracement in the five minutes chart. But, understanding that market structure is mostly at play, you stay back for a moment and take a look at the everyday and every week charts. On your Drummond Geometry charts you can quickly see that your entry was next to everyday and weekly support, at the bottom of the daily envelope and close to the weekly envelope bottom as well . You see that the logical target of this initial move is at the daily PLDot some 9 full points away, and that the improvement of the five-minute bar with its slight retracement is totally normal and consistent with the thought that the market has {further upside}. You set a price objective at the daily resistance and set a warning to sound when that is full filled, so that you are able to take profits here . You can then further assess if the market will reverse and walk back to the first support level or pause and keep going to higher level of resistance.
The point is that when watching market structure as opposed to arbitrary dollar value price objectives you mostly control what the market is doing . As a technical analysis explained course teaches, you are in full control since you know the structural aim all the time as the market goes between its higher time- period support and resistance levels.
Technical Analysis Explained And Trading Congestion Action
Today we’re going to talk about congestion action trading . A market that is in congestion action is one that goes back and forth between congestion confines , between support as well as resistance ( or between the block level and dotted line in the terms of Drummond Geometry ). This is action in the market that happens in congestion , and when no trend run is occurring . The level that is created by the highest high of the up trend that preceded is the Dotted Line , or in a down trend, the lowest low . The low of the very first bar that closes on the other side of the Pldot within an uptrend is the first Block Level , or the high of the very first bar on a down trend that closes on the other side of the PLdot.
Once you really have a good understanding of the theory, characteristics, and patterns of congestion action trading , it can be quite lucrative . It is like harvesting a crop, or slaughtering the fatted calf . You can earn your bread and butter with congestion action trading…. and , you can purchase a table for the bread , and for the table you can buy a house, and the estate to hold the house , and a car, driver, plane, boat, and anything else you want . In short , congestion action trading holds a lot of potential for you , if you learn and apply all that is to learn about congestion action trading .
What exactly is congestion action trading anyway?
One outcome of technical analysis explained in this way with Drummond Geometry is that the definitions are clear . Price is either in a trend run or it is not . When after more than three closes are on the PLdots one side and then it closes on the PLdots other side, this is not a trend run . When the market is not in a trend run, then it is in congestion . It’s all quite simple.
When the price ends up closing on the other side of the trending dot, the first bar is the congestion entrance bar . We can say that by definition the market is then in congestion . We know when the market first enters congestion a dotted line as well as a block level get created. This particular block level if the very first block level of this congestion. This means, congestion action is the name for that market action which begins with a congestion entrance bar and goes on for a time that is indefinite until on one side of the PLdot there are three closes, which is the start of another trend.
Now let’s look at the way the limits of congestion are defined with technical analysis explained, as well as how expansion can occur .
The congestion action is what defines the congestion’s parameters, which is also known as the confines of congestion . Keep in mind that the confines of congestion are defined by the dotted line and the block level , and the first block level gets set up by what is known as the congestion entrance bar. There can be an expansion of these levels . If prices goes outside the dotted line, or outside of the block level , while still in congestion ( without three closes being on the PLdot’s one side ), then the confines of congestion are being redefined by price and we can see a larger congestion area established . Before a new trend run occurs, this can happen various times.
We will continue this discussion about congestion trading in our next article in the technical analysis explained series.
Technical Analysis Training Is The Trend Going To Continue Or Stop?
So you’ve begun trading and you’ve come up with a stock trading strategy of your own . You have gone through technical analysis training course and and for your preferred style you have gone with trend traing after some time in thought.
You’ll definitely find trend trading a strategy that is attractive . Take a look at charts and you’ll see those trending patterns jump right out . You get excited about catching a trend in the beginning and then riding it out to its conclusion months later . The money beckons and sucess is before you !
Trading isn’t so easy in reality . You enter a trend – you may be a bit late or you get in near the trend’s beginning , but in any case you are aboard . As your predictions begin coming true and you are in this trade, you get a small profit . But then there is a very strong day and then the market stops dead when resistance is hit by the stock. You just let yourself think there is more ahead and you can’t make the entire move in one day anyway and then you add to the position you are in . The market opens the following day, goes nowhere for a while and then quickly heads south . Since you’ve added to the position you were in you are quickly back at break-even and in fact by the time you have orders in place you have taken a loss . What happened ? How could you tell before it happened that the trend wouldn’t continue and that the profit should have been taken when you saw that pause after the strong open?
Here are several tips for trading that will tell when a trend will stop and when it will continue . If you apply these to your technical analysis training you’ll be a step ahead of everyone else .
First and most importantly : go with higher time period charge when setting targets; look for areas where resistance and support are logical to determine where the market will start and stop its move .
If you do not know how to predict where future areas of support and resistance exist , or are uncertain how to coordinate time-frames in your trading , then take a quality technical analysis training for more information. You’ll find Drummond Geometry to be a top option but there are many schools of thought which are valid as well .
A tool is another element that you need that will help you judget robustness and trend strenght. Resistance or support will be broken through by a strong trend and a weak trend will stop and either go into sideways congestion at a point of resistance or support or it could reverse course . If in the analysis tool kit you have the perfect tool you’ll be able to figure out which action is more probable ; without the right tool, you’ll be waiting tos ee what happens, and the possibility of being disappointed is high .
You need to use momentum tools to appropriately measure this and then apply them to a smaller timeframe then the one you are in … in other words if you are trading a daily chart , try to pick the low or the high with the trades , then you look at the half hour or hourly chart to support the decisions you make intraday .
We will continue this discussion in part 2 of the technical analysis training series.
Technical Analysis Training – Part 2 Will The Trend Stop or Will it Continue
In the first part of the technical analysis training series on Will the trend stop or continue we discussed how measuring the strength of a trend requires two types of tools , while helps you decide whether a trend is going to continue or stop. Tool number one was setting targets properly according to support and resistance’s structure .
Momentum tools are the second type of tool needed . These tools should be used to make appropriate judgements and apply them to a smaller timeframe than the one you’re trading … basically if you’re trading on a daily chart, trying to pick the low or high of the day with the trades , then you would be looking at an hourly or half-hour chart to give you support in your trading decisions intraday .
What are these types of tools ? A short-term moving average is one of the best ; three moving averages should be used within a channel system and you’ll have a matrix created, which you can use to measure the strength of the trend against . Various channel systems exist but one of the best is the Drummond Geometry system (you should have learned this in your technical analysis training course) which as the center line uses a moving average that is short term of the average of the high, low, and close of the last three completed bars , projected forward onto the future bar . Then two channel bands are added to this based on averages of the past 3 pivot points that are similarly managed. Judgments that are very effective of the strenght of the market can be made by looking in relationship to this channel system at where sequential closes occur.
You should also establish market "flow" by measuring using various aspects of price strength , including how close to the low or high the bar close is , how far apart the open and close are , how small or large the bar range is, and the progress that the bar is making through the matrix of resistance and support you have.
Another tip : Because each time-frame has its own system of support and resistance , watch how easily or with how much difficulty in a trend the lowest timeframe monitor breaks its own support or resistance. If this happens easily, the more the underlying trend is probably going to be robust. In an uptrend , support close to the low of the bar is going to hold , and resistance nearby is more likely to break easily. Resistance breaking and support holding in a lower time period- this is a very reliable sign of the strength of a trend .
With these tips, your stock trading strategy should become a winner consistently as you learn how to know when trends are running out of stream and those that may go on for days, weeks, or months . A course that helps you sharpen your technical analysis training can save you a lot of time and money by giving you the right tools to make the distinctions that are so important.
Technical Analysis Explained – Part 2 of Trading Congestion Action
Let’s further discuss congestion action trading in the article series about technical analysis explained.
Until a new trend run occurs, congestion cannot be exited . With no new trend run, congestion occurs in the market. A congestion exit is a trend run as established by the previous action of congestion .
Let’s use emphasis that is a bit different and say this again .
There are two things that we can say congestion action does .
First of all, it creates original confines that are strong .
In the second place, strong expanded confines are created .
It’s the congestion entrance bar by which the original confines are created, which is the congestion action’s first bar , and the next bar, which is the second bar of action , and if there is no trend run the third bar . The highest high and lowest low of these three bars determines the confines , as are defined by block level and dotted line. These are the congestion original confines .
Here it should be pointed out that the third bar of congestion, price , does one of two things . Price either:
1) Goes into a trend run, going into congestion exit and the reversal of a trend , since congestion action is not confirmed by the third bar closing on the other side of the PL Dot . The congestion confines are then determined by the original confines , as set out by the highest high and lowest low of the first two bars . OR…
2) The close happens on the other side of the Pl dot, and there is a continuation of congestion action. The confines of congestion in this case are determined by original congestion, as set out by the highest high and the lowest low of these first three bars .
Now, what about expanded confines?
Well, congestion action can create expanded confines by moving so it is outside of the original confines, as long as in the meantime there hasn’t been a trend run . The confines of congestion is defined when the price leaves the latest confines . After this point , any congestion exit deals with this redefined confines, and not the original confines .
(We should note, of course , that there is an effect on price by the original confines, because any level or line is able to do so, but generally speaking , repetitive congestion action can build up the true confines , without a trend run appearing .)
Without a trend run, then there can be an expansion of the confines. Only when congestion is exited and price is in a trend run can we really say that the congestions final boundaries have been defined .
So for Drummond Geometry , technical analysis explained clearly and consistently defines congestion , and gives the framework that allows us to identify confines of congestion in each circumstance.
In future articles in this technical analysis explained series we’ll look closely at congestion entry and exit. These clear congestion definitions will definitely become useful .
Trading Congestion Action – Technical Analysis Explained (Part 1)
Congestion action trading is the topic for today. Congestion action in a market is one that goes back and forth between congestion confines , between support as well as resistance ( or between the block level and dotted line in the terms of Drummond Geometry ). Within congestion this market action occurs, and when there is not a trend run. The level that is created by the highest high of the up trend that preceded is the Dotted Line , or the lowest low created by the preceding down trend . The first Block Level is the low of the first bar that closes on the opposite side of the PLdot in a uptrend , or the high of the first bar that closes on the other side of the PL Dot in a down trend .
After you have a working knowledge of the patterns, characteristics, and theory of congestion action trading, you can make a lot of money in this type of market . It is much like crop harvesting . Congestion action trading can really earn bread and butter ….and what’s more , a table to hold the bread can be bought, and for the table you can buy a house, and the estate to hold the house , and a car, driver, plane, boat, and anything else you want . In short , you have a huge potential to make money with this type of trading, if you learn and apply all that is to learn about congestion action trading .
Congestion action trading – what is it ?
One outcome of technical analysis explained with Drummond Geometry is that the definitions are clear . Price is either in a trend run or it is not . A trend run is not in effect when there are three or more closes on the same side of the Pldot and then there is a close on the other side of that PLdot. If there is no trend run, then the market is in a congestion. It’s very clear and simple .
That first bar when price closes on the opposite side of the trending dot is the entrance bar of congestion . Then, but definition, there is congestion in the market. When the market first goes into congestion a block level and dotted line are created . This block level is the first block level of the congestion . This means, congestion action is what this market action is called which gets started with the congestion entrance bar and goes on for a time that is not defined until there are three closes on the PLdots one side , which is the start of another trend.
Let’s take a look at how congestion limits are defined with technical analysis explained, as well as how expansion can occur .
The parameters of congestion are defined by congestion action , also called the confines of congestion . You will remember that the confines of congestion are defined by the dotted line and the block level , and the congestion entrance bar is what establishes the first block level . But these levels can be expanded . If prices goes outside the dotted line, or outside of the block level , while still in congestion ( without three straight closes occurring on the one side of the PLdot), then the confines of congestion are being redefined by price and there can be established an even larger congestion . Before a new trend run occurs, this can happen various times.
We will continue this discussion about congestion trading in our next article in the technical analysis explained series.
Technical Analysis Explained: Market States or Types of Trading
There are steps the market moves in , and you can isolate and study these steps , one at a time . Furthermore , in a regular sequence these steps follow one another, and this sequence can be analyzed and defined, piece by piece .
If the type of trading is understood that the market is manifesting at any given moment , we will be able to come up with the tools and techniques that work the best for the particular activity going on in the market. Furthermore , if we know which type of trading came before , which is here now , and which is likely to follow , we will have a leg up on most other traders . We can always choose the best tools , and we will be prepared for what is about to happen . When it comes to trading, that is a big part of the battle.
Our experience as well as a technical analysis explained course has shown that our definitions of types of trading need to be very clear, or the analysis done will quickly become without value . We want definitions that can be applied to any market , at any time . We need definitions that are both simple and robust .
Within the technical analysis explained series types of trading will be discussed in future articles, and we will find that simple definitions combined with careful observations can take us a long, long way toward trading success .
A simple overview will be our starting point , so you’ll be able to get the big picture. Then we’ll look at a trend run in the market . After observing trends in the market, we’ll look at how the time period analysis and Drummond Geometry tools combined will help us figure out where the trend will come from , and where it is likely to terminate . We will also see how our monitoring tools , the 1-1 zones and the envelope , go along with practical observations and theory collections . And finally we’ll show you some trading rules that can be helpful as your own trading plan is developed.
So, let’s get started ….
Two major divisions will be used to divide the activity of the market: markets in congestion and trending markets . Congestio will be further divided into congestion entrance, congestion action, and congestion exit . Trend reversal will be added as another condition of the market , giving us fiver different types of trading.
The definition of a trend is irrevocably attached with the position of the close of the bar called the Pldot. To the trend definition there isn’t another element , while there is much to say about trends and their own characteristics. Trends are always defined by one rule: If 3 closes occur on the same side of the Pldot, the market is in a trend . This is the three-close rule , and no trend can happen without this three-close-on-one-side-of-the-PLdot rule . It will never occur . The next topic in the series on Technical Analysis Explained we will talk about Congestion Entrance .
Technical Analysis Training – A Beginers Perspective
When traders embark on their technical analysis training journey, they tend to think the main challenge is going to be learning various technical tools. Usually they seek a person who they believe to be an “expert.”
However the idea is to develop your own way of looking at the market , and to get comfortable with this vision , and with the patterns which you see , and also to be comfortable with and identify them so you’re able to repeat them again and again .
The most important part of technical analysis training is really personal self-study and building personal awareness .
But whether you learn enough of anther’s vision or if you come up with a vision of your own , you can become comfortable with them to the exclusion of all others , and so you can follow your understanding wherever it leads , without allowing other inputs and voices to get in the way .
If you’re going to become a great trader you have to learn how to isolate yourself from outside influences . Keep in mind that everyone else reacts to terminations of energy , and that the crowd of people will be at extremes if you’re going to take action in a direction that is opposite . Your mental state of mind must be such that you are able to do things that most people will not do , because they are afraid to act against the crowd , or they can’t see another option for action because they are asleep and unaware of the reality of the market action that is unfolding . Monitoring, awareness, and observing is needed for this state of mind, and it’s a talent that can be learned .
Let us talk about the nature of probability , and its relationship to technical analysis training, the need for research and how to go about doing it , and how it is valuable for the financial outcome for traders.
The tools of technical analysis can be so accurate that it sometimes seems as if they are infallible . Some beginning traders start to think that every support will hold , and that it’s time to jump in with each trend termination . Of course life is not that simple . If the market could be completely and accurately predicted in advance there wouldn’t be any market, and everything could be figured out by a computer. Sellers and buyers wouldn’t differ in opinion , there wouldn’t be losers or winners and the same amount of money would be had by all. The market is definitely complex and can do just about anything .
Most people only rarely have sufficient awareness to note this simplicity , since our perceptions are usually clouded with various preconceptions and influences . But patterns do exist , and some may repeat , since energy can and does repeat itself . The big thing is to know when a pattern is going to hold , and how to tell when it is not holding . Even further, when looking at a large sample, to know when a pattern is going to break or hold . These tools can be effective and accurate — but on a percentage basis . The odds are yours, but on no trade is there a guarantee you’ll succeed .
The most important thing to technical analysis training is to do your personal research carefully so you can figure out how patterns are going to act when looking at them in a large sample.
Technical Analysis Explained: Trading Congestion Entrance
Here as a part of the Technical Analysis Explained series where congestion entrance is discussed .
We know that the market moves from trend to congestion and from congestion to trend , in a continuous cycle,repeating itself again and again and again forever . This has occurred as long as markets have been in existence and no doubt it will continue happening as long as markets are around . The only time that the cycle doesn’t go on are in times where there is artificial constraint, regulation, or intervention, such as things like price limits, price fixing, and market regulation – and then the disruption only occurs on a temporary basis. But as long as supply and demand can vary , and as long as together in trade humans come togetherand act on their differing perceptions of value and opportunity , markets will engage in trends and congestions .
There are different names this can be called . Often the idea of equilibrium and disequilibrium are discussed, some speak of vertical moves and horizontal moves describing the way the chart moves across the page , some speak of distribution as a movement upwards and the sideways movement as development . Really it’s all the same thing .
A trend is a movement that can take you in a particular direction ; a congestion is a period on the market where it goes back and forth between resistance and support and it’s movement is horizontal on the pages.
We saw in earlier articles in our Technical Analysis Explained series that we have a clear definition of what a trend is – this is a series that has three or more consecutive bars that end up closing on a particular side of the Pldot . Because a trend and congestion are opposites, the definition is expected to be simple of a congestion, and the definitely is simple. A congestion occurs in the market when the market doesn’t close on a certain side of the Pldot for three times in a row. How could this be anything else? The market has to be in a trend or not in a trend, we’re already aware of what a trend happens to be, so a congestion is basically everything else. Markets are either in congestion, or they are in a trend.
Now we break our discussion of congestion into three separate lessons , as we define three types of congestion – congestion entrance, congestion action, and congestion exit . As a little overview, here’s a look at their definitions.
Congestion entrance trading occurs after the market is in a trend with three consecutive closes on one side of the Pldot , but then the next bar closes on the opposite side of the Pldot . This particular bar, closing on a different side of the Pldot than the other previous three, is the very first congestion bar , and it’s the first one after the trend .
Congestion action trading happens as there is a swinging to and fro of the market, closing on one side or the other side of the Pldot as it moves forward bar by bar . In the next article we’ll discuss this more in the Technical Analysis Explained series.
Congestion exit trading happens when the market is about ready to go into a new trend . This should make sense And so if the market violates one of the confines of congestion , either the block level or the dotted line , then the market is manifesting congestion exit trading . Of course, there’s a lot to be said about it , and it is a most attractive topic . But that is for another time and so we will not deal with it more here . Look for other articles on the topic .
Technical Analysis Training: Things to Consider When Choosing your Training
So you’ve made up your mind you want to get in control of your future financially. And you’ve studied the stock and commodities market and now you have some opinions that are well founded. You’re up to speed on the latest economic indicators and the strength of the dollar . You know what you’d like to do , and in which markets .
You have heard the things the wise ones on Wall Street say “Use the fundamentals to decide what you should trade but technical analysis should determine decisions on entrance and exits .”
You probably know you need technical analysis training. But to learn technical analysis , you’ll need to take a course in technical analysis . Wondering how to find a great one ?
Here are a few great tips for picking a good technical analysis course .
What are the author’s credentials?
Look for someone who has experience in the field for some time, and is not likely to be swept away by the latest fad . Quite a few fads go through Wall Street but surprisingly few enduring ideas .
Is the author a trader or an academic ?
If the material you need to learn is basic material that is well established , then reading after an academic is fine for your technical analysis training. However, if you want more advanced techniques , try to find an author that is a successful trader, as it is likely that he or she will focus on the most useful and productive strategies .
Is the technical analysis training applicable to any tradable security ?
If you plan to spend your time learning the patterns of technical analysis, then you want them to be applicable to Forex trading, commodities, stocks, and futures. It would not be the best use of your time to learn about technical analysis that only was applicable to the Dow Jones.
Are the techniques simple and straight forward or overly complex ?
There are certain courses that require you have a background in heavy math, such as college-level calculus . Some off the best training can be understood by someone who is intelligent and has a quality high school education
How much does the course cost?
The cost is going to be something to consider but be careful about courses which are free or for very low cost . This does not mean they’re not worth anything, for a free course may contain a lot of useful basic information , especially if it’s public domain information and it is available in books. Espeically in the world of finance and trading, you’ll get exactly what you pay for and information that is useful and from real successful traders probably will cost you. Research the course and if you can try to speak with someone who took the course to determine of there is true value to the technical analyses course, indicators or software .
Keep your eyes open and do your homework , and you’ll find the right for you technical analysis training!