The entry and exit is very important in any financial market if you want to make some money. It is all about the right timing. Even if you have entered the market at any time, my personal belief is that exit point is very important. Excess greed can cause you trouble at many times. Every trader, whether in futures, currency, bonds, or stocks, study and do some research or go with the technical analysis to judge know what the market is going to do before it actually does it.
Just like one cannot predict the future, so the markets cannot be predicted to 100% accuracy as it is impossible with price-affecting events which are basically random and unpredictable. But yet if you are a regular watcher of any of the dedicated business channels, they keep calling the experts who from experience that there is a way to identify trends, anticipate when those trends will reverse themselves, and predict with reasonable accuracy how big the corrections will do. That method is called technical analysis.
Technical analysis is the term used in the financial world for a fairly diverse set of methods unified by one the basic conviction which is the behavior of market is not random but occurs in accordance with patterns that repeat themselves over time. Technical analysts rely on graphs or charts of historical price data to reveal the patterns. The competing approach to markets is known as fundamental analysis, and so called fundamentalists believe that the most important things to know are business statistics such as corporate cash flow and price-earning ratios. Ask these experts and they will tell how can you make investment decisions most profitable.
Besides, in today’s global, fast-paced trading environment, it is not possible to track data about all the companies or commodities. A brief glance at financial history shows that greed, fear, and crowd following have been major factors in booms and busts. Since technical analysts believe that all forces affecting the market are by definition reflected in price levels, those forces must include the particularly elu¬sive force known as investor sentiment.
Each type of market contains the seeds of the other, and represented price changes with a system of bar graphs called candlesticks after their distinctive appearance. Charles Dow, the financial journalist and founder of Dow Jones identified three different kinds of trends, arguing that an apparent trend is meaningful only when it is accompanied by high trading volume and that it should be assumed that a trend will continue until there is definite evidence that it has ended.
Nowadays one does not have to get into the mathematics or be a math’s expert to perform technical analysis. Personal computers and an ever-growing variety of software options make it possible for the ordinary intelligent trader to benefit from the theoretical brilliance of innovators such as Lane and Elliott. Data vendors make a huge amount of price information available over the Internet.
It is important to bear in mind that technical analysis is both a science and an art. There are no
quick and easy answers, no single algorithm that always tells you what to do. A successful trader must not rely on only one method and needs to develop sensitivity to the markets periodic vibrations. Eventually, one will narrow down to methods of analysis and decide on a core group of market indicators that work for you.