Types of Trading - Technical Analysis Explained
There are steps the market moves in , and these steps can be isolated and studied , one at a time . Also, these steps follow each other in a regular sequence , and that sequence can be defined and analyzed , piece by piece . If the type of trading is understood that the market is manifesting at any given moment , we will be able to come up with the tools and techniques that are most effective for a specific market activitiy . Also, You'll also find, if we can figure out the trading previous, the trading occuring now , and the type of trading that will follow , we will have a leg up on most other traders . We can always choose the best tools , and we'll be prepared for the future . Sometimes that's half the battle in trading . Experience and a technical analysis explained course teaches that the types of trading definitions must be totally clear , or the analysis done will quickly become without value . We need definitions that apply to all markets , and to any timeframe . These definitions need to be simple, as well as robust. In this technical analysis explained series we will spend some future articles talking about the types of trading , and the combination of observations that are careful and definititions that are simple can help us reach 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 looking at trends , 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 . The monitoring tools will also be observed, the envelope and the 1-1 zones , fit in with our growing collection of theory and practical observations . In the end we will suggest some trading rules that may help you as your own trading plan is developed. Let's get going.... We divide all market activity into two major divisions : 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 what a trend happens to be is definitely attached to the close of the bar position called the Pldot. No other element is part of the trend definition, although for various trends there is much to say about their characteristics . Trends are always defined by one rule: If 3 closes occur on the same side of the Pldot, there is a trend. This rule is called the three close rule , and there is no kind of trend that can exist without this three-close-on-one-side-of-the-PLdot rule . It will never occur . Next in our 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.