Technical Analysis Explained – Types of Trading or Market States
The market moves in definite steps , and you can isolate and study these steps , each by themselves. Furthermore , these steps progess in a sequence , and this sequence can be analyzed and defined, item by item.
If the trading type can be understood that the market is manifesting at any given moment , we can find techniques and even tools that do the best job for that particular kind of market activity . Also, You'll also find, if you know the type of previous trading , which is here now , and the type of trading that will follow , it will give us an advantage . We'll be able to choose the top tools, and we will be armed for what is going to occur. This is often half the battle .
Our experience as well as a technical analysis explained course has taught us that the trading definitions must be crystal clear and without the slightest ambiguity , or we lose the value of our analysis. We want definitions that can be applied to any market , at any time . These definitions need to be simple, as well as robust.
Within the technical analysis explained series we will spend some future articles talking about the types of trading , 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 will start with our discussion of the market in a trend run . After observing trends in the market, we'll see how the combination of time period analysis and Drummond Geometry tools 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 , both the envelope and 1-1 zones, fit in with our growing collection of theory and practical observations . And finally we'll suggest some rules for trading that may provide some help as your own trading plan is developed.
Let's get going….
Two major divisions will be used to divide the activity of the market: markets in a trend and those in congestion. Congestio will be further divided into congestion exit, entrance, and action . We'll also add as the final market condition, trend reversal, bringing us to a total of five trading types .
The definition of a trend is attached irrevocably to the position of the close of the bar vis-à-vis the Pldot . No other element is part of the trend definition, though there will be lots to say about the characteristics of various trends . Trends are always defined by one rule: If on one side of the Pldot there are three closes , it is a trend . This rule is called the three close rule , and there is no kind of trend that can exist without closing on the one side of the Pldot. This will NOT happen. The next part of the series on Technical Analysis Explained we'll discuss Congestion Entrance.
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