Charting techniques have evolved considerably from the 17th-century traders in Japan who first used candlesticks to track the rice market. Even since the advent of the “modern stock market”, the new technical realities are entirely different than the time of Charles Dow and the early forefathers of the NYSE who used hand drawn charts for their analysis. Today, traders have a myriad of technical and stock market charting tools available to them. So how do you make sense of all these charts and find ways to be consistently profitable in 21st-century markets? Here are 3 ways to profit from stock market charting in the 21st century.
Ignore the Market Noise
First, trust the charts you choose to use. Technicians contend they have an edge because they have an idea of what the trading masses are thinking by the tracks they leave on a price chart. Price includes everything. Although fundamental numbers are an important facet in formulating prices, trading is more about the mass psychology of traders than about supply/demand figures or statistics. A trader who is making or losing money is likely to react in a specific way that will be similar to how other traders in other times and other fundamental conditions have reacted in the past. Because of the tendency of human beings to respond to developments as they have before, technical analysts study price patterns on charts to spot instances where traders might react as they did in the past.
So while it is extremely important to recognize that charts don’t lie, they generally rely on past data and this can’t necessarily predict future market direction.
Take your Technicals to the Next Level
Since much of the information on traditional charts is based on prices that have already occurred, they produce lagging indicators – that is, they may reflect what happened in the past well but are not much help in predicting future prices. Of course, that’s what traders would like to know the most and why 21st-century stock market charting has involved to more specialized techniques to forecast future prices.
These techniques include Elliott Wave – which says that price moves in three impulse waves and two corrective waves, and previous waves can be used to project price targets and timing of future waves and Fibonacci numbers and ratios – a mathematical series of numbers (1+1 = 2, 2 +1 = 3, 3+2 = 5, 3+5 = 8, etc.) and a ratio between them (0.618 and 0.382 are most common) can help determine price retracement and extension levels.
An even better way is to use charts that employ predictive indicators to forecast future stock prices. VantagePoint transforms traditional moving averages into predictive, market leading indicators. By using a combination of past price data and its predictive technologies, VantagePoint’s indicators give you advanced notice 1-3 days ahead of a stock’s trend change.
Make your Charts Global
Considering the intertwined nature of today’s global markets, stock charts need to be increasingly complex to not only track an issue’s price but to track the impact of other assets that may affect the stock you are trading.
With its cutting-edge technologies, VantagePoint mines global market data based on intermarket analysis and applies the pattern recognition capabilities of neural networks to produce proprietary, leading indicators that look ahead, not backward for the stocks you trade.
For example, when you are looking at a chart for Tesla (TSLA), a confluence of global markets (from Crude Oil to the Japanese Yen to other stocks in the US auto sector) will affect the stock’s price. The predictive indicators found in VantagePoint incorporate all this intermarket analysis so you have charts with indicators that give you a true 21st century perspective on the markets that can help you to make consistent profits.
