Welcome to Chart Formations
Forex trading, stocks trading, index futures, commodities, and any other type of equity trading offers the great possibility of financial freedom, but is fraught with danger. The oft quoted statistic that 95% for all traders fail in the market is something anyone entering the market has to take heed of and prepare themselves so that they enter the market prepared and no illusions. There is money to be made, but equally, there is also money to be lost! Therefore, you need to consider what is needed to trade equities successfully.
There are three essential qualities anyone entering the market required if they hope to be successful. These are:
Expendable capital
Capital or money is the obvious requirement but note that we are not just talking about capital here, but expendable capital. This is because your dependence on that capital is important as it often places constraints on and impedes proper money management and often dictates your emotional response to trading.Psychology
Trading often has a major psychological aspect in terms of emotional response to not only losses, but also winnings.Trading Method
A holistic trading method is not just a trading system based to fundamental or technical analysis, but also encompasses money management and emotional response to the market.
This is where Chart Formations comes in. Chart Formations is an online stock trading resource that is dedicated to providing reliable information to assist users to trade the stock market, from the perspective of technical analysis. As such, we discuss information related to stock charts, technical indicators and technical analysis. The ultimate aim is to assist users in creating their own high probability, stock trading strategies. But our approach is more holistic as we focus not just on technical analysis but also on money management and psychology in the market environment.
Our site is continually growing as we add more articles and information so check back often and do send us your feedback so we can improve Chart Formations even further.
Stock charts are the foundation of technical analysis. They are a graphical representation of the historical price movement of a security, and make the recognition of chart patterns possible. There are different types of charts that can be used in technical analysis. These include the popular bar charts and candlestick charts, as well as line charts and point and figure charts. With the exception of point and figure charts, which only plots a price change when a new high or low is made, all charts plot price action for a specific duration of time, which is called the time-frame. Each type of chart plots price action differently, and displays different information about the price action in a given period of ...
There are different types of trading systems but all systems must have three key elements: they must have some level of probability, or a degree of success, they must have a good risk/reward ratio for each trade, and they must be based on a clear and objective set of rules. The risk/reward ratio is quite important as a risk/reward of 1:3 mean that a system can have a success rate of less than 33% and still make a profit, although it might not be a viable system. A risk/reward ratio of 1:3 means that you can be stopped out on three out of four trades but if the fourth trade is successful, you will still break even, as long as you follow the system's rules.
Most trading systems are either trend following systems or mean reversion systems, which are also called contrarian systems. Trend following and mean reversion systems are not diabolically opposed. It is therefore possible to combine elements of both ...
Wealth Warning
Trading equities, options, derivatives, currencies, commodities or any other financial security can offer significant returns BUT can also result in significant losses if the market moves against your position. It requires a strong commitment to skill development, knowledge acquisition, and emotional control. It should be treated as a business with a clear business plan, a risk analysis, and set of attainable goals. The risk associated with trading the vagaries of the stock markets is probably the most important consideration as it has a profound effect on emotional control. You should not trade the stock markets with money you cannot afford to lose as there is considerable exposure to risk in any stock market transaction.
Furthermore, the past success of any trading method, strategy, or system is only indicative of future success. Under no circumstances should past success be construed as a guarantee of future success!