Graphs & Their Application To Speculation In Trading FOREX, MCX, NSE
In studying market action, nothing is more fundamental than graphs or a history of past market action. There is no life in the charts and it does not represent living psychology. Life comes into them when past market action is used to project future course of price movement. Graphs in trading are like a road map. How can you travel from one point to a distant city without one? Graphs are more than just a history. They depict the actions, emotions and ideas of mass speculation trading.
All nature is controlled by innate laws. One might also conclude that there is an inexorable law of price. It might be compared to the medical profession. Medicine built its study starting with the human body and studying the past needs of each function of the body. In other words, this is an action-reaction concept. Why can’t the same scientific thinking be applied to price and market action? This is where a graph of past market action comes into play. We find many fluctuations in price movement with the logical conclusions that these actions and reactions were caused by the psychology of the mass mind. The student of market action will find that a certain sequence of events on a graph will normally lead to a logical response and such action occurs with enough frequency that it is almost law. It is not absolute because man’s mind cannot be reduced to an exact science. However, recognition of the probability of a market response places the student ahead of the vast majority of traders.
Speculation Trading is anticipation. Market action discounts coming events before they happen. The function of price is to integrate supply-demand relationships. Since the beginning of time, man has largely been controlled by the emotions fear and greed. When a student of market action allows these emotions to influence his market response, he loses many opportunities in the market. The student must at all times resist these two emotions while in trading FOREX, MCX, NSE, COMEX markets. Confidence and courage are required to overcome fear and greed. Courage is inborn. Confidence in trading is gained by study, study, and more study.
Daily Bar Graph
A daily bar graph gives opening, high, low, close, volume and open interest on commodities. In a stock there is a limited number of shares, whereas, in a commodity the shares or outstanding contracts are unlimited, as long as there is a buyer or seller. Open interest refers to the number of outstanding contracts in the commodity market.
Closing Price Graph
A closing price graph is very necessary in proper market analysis. Some market students feel this is the most revealing of all graphs. The closing price is the most important one of the day, as this represents the final sentiment after the total day’s activities. At a later time, it is a support or resistance point. The more closings there are in a particular zone, the more important this level becomes as an area of support or resistance.
Angle graphs are extremely useful in giving clarity to price action. This cuts out a lot of lines and marks on a chart. This graph will be used in our mathematical analysis of moves including angles, time, distance, and envelope studies. It is made by extending a line from a previous low of a move to the next high. It reverses when the low of a previous day is broken.
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