Would you like to learn about a type of commodity futures price chart that is more effective than the type you are probably using now? If so, keep reading. If you are brand new to the art/science of chart reading, don't worry, this stuff is really quite simple to learn.
In the 1600s, the Japanese developed a method of technical analysis to analyze the price of rice contracts. This technique is called candlestick charting. Candlestick charts are simply a new way of looking at price; they don't involve any calculations.
There are two types of ways to analysis the price of a stock, fundamental analysis, and technical analysis. Fundamental analysis is used to gauge the price of a stock based on the fundamental attributes of the stock, such as price/earnings ratio, Return on invest, and associated economic statistics.
Some market technicians that use technical analysis to look for a nearing market bottom or market top have noticed over the past several years that the stock market will consistently move in a 5 wave pattern which is based on concepts from Elliott Wave Theory. When the stock market is trending upward a 5 wave pattern consists of 3 separate moves upward and 2 separate moves downward before a top occurs. Meanwhile when the stock market is trending downward a 5 wave pattern consists of 3 separate moves downward and 2 separate moves upward before a bottom occurs.
Few traders ever stop to consider the context that defines the foreign exchange marketplace, but all of them should. As forex matures in its role as a retail investment environment the rules – and the stakes – will only multiply.
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