|
A
century ago, Charles Dow fathered "technical analysis"
by creating the Dow Jones Industrial Average and the Railroad
Average. Dow promoted market analysis through his editorials
in The Wall Street Journal, and technical trading
theory has grown and changed through generations of technical
analysts and traders (including Hamilton, Rhea, Schabacker,
Wyckoff, Elliott, Magee, Russell, and Prechter).
Many great traders in the stock and futures markets also
have relied on technical analysis (including Livermore,
Gann, Dennis, Eckhardt, Seykota. Marcus, Kovner, Jones and Weiss).
Though traders apply technical
theories differently in light of their own trading styles, certain
themes are common among them. The key elements of technical
trading include money management, risk management, self discipline,
and rigorous adherence to a set of trading rules.
Commodity
markets allow producers (e.g. farmers) and users (e.g. processors)
who need predictable cash market prices to transfer risk (and
therefore profit opportunities) to speculators. Futures trades
are essentially speculations on the future direction of prices
for a particular commodity or investment vehicle; they are perhaps
the only investments where you can start with limited capital
and make extraordinary returns (or extraordinary losses). Futures
have the reputation of being too risky and too expensive for
the average individual. However, it is possible to trade them
with modest risk capital, at a variety of risk levels. Good
futures trading does not require exceptional intelligence; much
more important are patience, discipline, control over emotions
(such as greed and fear), and a sound trading plan that is faithfully
executed over the long term.
|
