• The others train you to forecast, but our scholars train you to forecast accurately in the capital market

Paper Type: Lecture Note- FIB. 1789

 

A maturing technical analysts or  students’ aspiring to become a technical analysts in securities trading like assets management, forex trading, commodity trading, stock etc. should be prepared to come in terms with recurring numbers and it connotations. Furthermore being prepared to study and establish a very deep knowledge and understanding in the probability of recurring of numbers and it relational binomial distribution for accurate forecasting.

It is easily perceived by brain washed student in trading forex and it analytics as well as incompetent teachers lecturing on trading forecast, to let the course appear as gambling or lottery enterprise because they have assumed into this profession illegally, hence becoming a quack practitioners in counterfeiting the philosophical practice of this profession.  You need to caution your colleagues in following strange broker Institutions, in the name of free forex trading; the benefit is gained by the broker when you deposit your money into their platform, because they know, you wouldn’t be able to trade based on the knowledge delivered to you, so such committed funds of yours will soon lock in their system like a gambling game, becoming a profit earned by the broker with part of the fees used to offset their seminar events expenses, which implies you have indirectly paid for your seminar fee to receive fraudulent knowledge. You stand to lose because you become a victim to a shady business deal to exploit you in the name of free trading classes.

This recurring numbers as earlier introduced, interrelate mathematically as a data to communicate an information about the behaviourial psychology of the global market players to aid in decision making for the technical analyst. It has to be noted that, the technical analyst in the professional practice, do not steady the ‘behaviour’ of market players as the popular notion in many books and oral sayings seems to submit. The figures as data, projected from the trading room is a graphical interpretation of ‘behaviourial psychology’ of the players in the market. The two words connote different meaning which could not be undermined in this professional practice. It is in the behaviourial psychology of the players on price that emerges into trends in the electronic market, popularly termed as trading room.

What is Trend: – It is generally observed, as the direction in which the market is developing or changing, which is always indicated by successive peaks and troughs. So the trend in this case becomes a data tool, which present a graphical interpretation of the behaviourial psychology of the market players on price. This then become a language code understood by trained technical analyst to guide in making accurate decisions which will yield profits to investors.

The Grandfather of Technical Analysis, Charles H. Dow, classified trends in the trading market into three categories that define an analyst strategies and decision making. Which are

  1. The Primary Trend
  2. The Secondary Trend
  3. The Tertiary Trend

The Primary Trends:  Are noted to be a type of trend that indicate a long-term movement of prices and could last for several months to even years, sometimes. This type of trends are common among financial assets like stocks, commodity and bonds markets

The Secondary Trends: Are noted to be a type of trends that reversed in short term, caused by short term deviation of price movement and could last from ten days to three months. This type of trends are very common in commodity and forex markets

The Tertiary Trends: Are noted to be a type of trends that fluctuates and caused by daily fluctuations of price movements and could last for hours to months. This type of trends are commonly found in the forex market mostly

In the trading market of trends development, it is observed to possess three different kind of characteristics, which are;

  1. Uptrend
  2. Down Trend
  3. Sideways Trend

Up trend: – This type of trend possess series of higher peaks and troughs

Down trend:- This type of trend possess series of lower peaks and troughs

Sideways trends: – This type of trend possess many horizontal peaks and troughs, with the direction in which the security price moves absolutely opaque. This type of market direction is sometimes referred to as ‘trendless’.

After many years of Charles H. Dow Theory on trends as presented by William P. Hamilton, Robert Rehea and E. George Schaefer, there came a new theory in detecting price movement by Ralph N. Elliott in 1938 referred to as Elliott Wave theory, which state that security price can be described by a set of wave patterns. Long and short term wave’s cycles are superimposed and results in a complicated pattern of price movements.

Despite the existence of two varied theory used in describing the theory of price movement in the market, the theory of trend application, still remain the most popularly applied art in market forecasting statistically. And very easy to be monitored using statistical indicators of the trade room to arrive to simple decision making by a technical analyst.

Trend line: – is an indicative tool used in the trade room to identify trends and it reversals. There are two types of trend line commonly used in the trade room. They are

  1. Uptrend line
  2. Down trend line

Up Trend line: – Is a straight line drawn to the right in the chatroom, along a successive lows

Down Trend line: – Is a straight line drawn to the right in the chatroom, along successive highs

It is out of this trends that patterns could be observed by the trader and enter the market with a decision to transact in the financial market, in the path of buying or selling.

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Emmanuel Tweneboah Senzu is a Professor of Economics & Investment Banking of Frederic Bastiat Institute at Cape Coast Technical University Ghana. Tsenzu706@gmail.com

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