Technical Trading Tactics : Part Three

Formulating a trading plan should include the initial entry position, the risk management loss objective, and the targeted profit objective in other words, everything about the trade from start to finish.The type of analysis you do should lead to a means to determine those three components of a trade before you ever get into it. For many traders, analyzing price data on a chart—technical analysis—is the solution. The emphasis here is how to understand and apply technical tools without the syndrome of analysis paralysis—that is, when too many studies are done,dominating the trader’s time and leading to inaction. It’s true that no one ever lost money by not trading, but if you are a trader or trying to trade, decisions must be made.

There are three main popular charting techniques: bar charts, point-and figure charts, and candlestick charts.Another technique of charting or watching price patterns and the behavior of the market is market profiling.The importance of any type of charting is to help understand where market prices have been and, based on past historical reactions, to predict where prices may go in the future. 

BAR CHARTS : Bar charts are the standard means of chart analysis and probably the most widely used charting form and technique.On a graph the horizontal axis represents time, and the vertical axis represents price levels. The time represented by the vertical bar could be 1 minute, 5 minutes, 60 minutes, a day, a week, a month, or even a year.

                                                              Basic bar

POINT-AND-FIGURE CHARTS : The point-and-figure method of charting has a long history.Point-and-figure charts have one unique difference from other charts:Time is not a concern; only price action is. The vertical axis represents price,the same as a bar chart. Instead of bars for a time period on the horizontal axis, however, the columns on a point-and-figure chart alternate between Xs for upward price movement and Os for downward price movement, changing from one character to the other when a specified amount of price movement occurs.
 
To be Continued.....