by Ted Hearne
The market moves in definite steps , and these steps can be isolated and studied , one by one . You'll also find , these steps follow each other in a regular sequence , and you can definte and analyze this sequence , by each piece .
If the type of trading is understood that the market is manifesting at any given moment , we can find techniques and even tools that work the best for that particular kind of market activity . Furthermore , if we can figure out the trading previous, the trading occuring now , and the following trading, we'll have an advatnage over other traders. We can always choose the best tools , and we will be armed for what is going to occur. This is often half the battle .
Experience and a technical analysis explained course teaches that the types of trading definitions must be crystal clear and without the slightest ambiguity , or the analysis done will quickly become without value . Definitions need to be those that can work with any market, within any timeframe. Our definitions must be robust and simple .
In this technical analysis explained series types of trading will be discussed in future articles, and we'll find that careful observations and simple definitions combined can help us reach success .
The starting point will be an overview that is simple, so that you can see how things will fit into the big picture as we proceed . Then we will start with our discussion of the market in a trend run . After we make our observation about trends , we'll see how the combination of time period analysis and Drummond Geometry tools will enable us to identify those areas where the trend is likely to originate , and where it will end . We will also see how our monitoring tools , the 1-1 zones and the envelope , fit in with the collection that is growing of observations that are practical and theory. Then we will suggest some trading rules that may help you as you come up with a trading plan of your own .
Let's get our start ....
We divide all market activity into two major divisions : markets in congestion and trending markets . We can divide up congestion further into congestion action, congestion entrance, and congestion exit. Trend reversal will be added as another condition of the market , bringing us to a total of five trading types .
Trend definition is irrevocably attached with the position of the close of the bar vis-à-vis the Pldot . There is no other element to the definition of a trend , though there will be lots to say about the characteristics of various trends . A trend is always defined by this rule : If there are three closes on one side of the Pldot , there is a trend. This is the three-close rule , and no trends can occur without closing on the one side of the Pldot. It will never occur . The next part of the series on Technical Analysis Explained we'll discuss Congestion Entrance.
Author:
Ted Hearne is a Forex and bond trader who has written extensively about trading and has co-authored a "technical analysis explained" course called "Drummond Geometry". His biography and further information about his work can be found at the technical analysis explained website.
Article Source: http://www.articlesnatch.com/Article/Technical-Analysis-Explained--Market-States-or-Types-of-Trading-/932855
