Introduction
Quantitative methods for evaluating price movement and making trading decisions have become a dominant part of market analysis. At one time, the only acceptable manner of trading was by understanding the factors that make prices move. and determining the extent or potential of future movement.
The market now supports dozens of major funds and managed programs, which account for a sizable part of futures market open interest and operate primarily by decisions based on "technical analysis." selection, which can require sorting through thousands of individual world equities each day, has become a problem in data reduction finding specific patterns that offer the best expectations of profit.
Many commercial participants in the markets. who once restricted research to supply and demand, or institutions once only interested in earnings and debt, now include various technical methods for the purpose of timing or confirming price direction.【交易知识macd.org.cn收集整理】
In many ways, there is no conflict between fundamental and technical analysis. The decisions that result from economic or policy changes are far reaching: these actions may cause a long term change in the direction of prices and may not be reflected immediately. Actions based on long term forecasts may involve considerable risk and often can be an ineffective way to manage a position.
Integrated with a technical method of known risk. which determines price trends over shorter intervals, investors at all levels have gained practical solutions to their trading problems.
Leverage in the futures markets has a strong influence on the methods of trading. With margin deposits ranging from 5 to 10% of the contract value (the balance does not have to be borrowed as in stocks), a small movement in the underlying price can result in large profits and losses based on the invested margin.
Because high leverage is available, it is nearly always used. Methods of analysis will therefore concentrate on short-term price fluctuations and trends, in which the profit potential is reduced. so that the risk is often smaller than the required margin. Futures market systems can be characterized as emphasizing price moves of less than 20% of the contract value. Trading requires conservation of capital, and the management of investment risk becomes essential.
Even with the distinction forced by high leverage, many of the basic systems covered in this book were first used in the stock market. Compared with securities. the relatively small number of futures markets offer great diversification and liquidity. The relative lack of liquidity in a single stock lends itself to index analysis, whereas the commodin index. now tradeable as the CRB index, has never become very popular.
TECHNICAL VERSUS FUNDAMENTAL
Two basic approaches to trading futures are the same as in trading equities: fundamental and technical analysis. In futures, a fundamental study may be a composite of supply and demand elements: statistical reports on production. expected use. political ramifications. labor influences, price support programs, industrial development everything that makes prices what they are. The result of a fundamental analysis is a price forecast. a prediction of where prices will be at some time in the future.
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Technical analysis is a study of patterns and movement. Its elements are normally limited to price, volume, and open interest. It is considered to be the study of the market itself. The results of technical analysis may be a short or long term forecast based on recurring patterns; however, technical methods often limit their goals to the statement that today's prices are moving up or down. Some systems will go as far as saying the direction is indeterminate.
Due to the rapid growth of computers, technical systems now use tools previously reserved for fundamental analysis. Regression and cycle (seasonal) analysis are built into most spreadsheet programs and allow these more complex studies, which were once reserved for serious fundamental analysts, to be performed by everyone. Because they are computerized, many technicians now consider them in their own domain. There will always be purists on either side, rigid fundamentalists and technicians, but a great number of professionals combine the two techniques. This book draws on some of the more popular, automated fundamental trading approaches.
One advantage of technical analysis is that it is completely self contained. The accuracy of the data is certain. One of the first great advocates of price analysis, Charles Dow. said:
The market reflects all the jobber knows about the condition of the textile trade;
all the banker knows about the money market; all that the best informed president
knows of his own business, together with his knowledge of all other businesses; it
sees the general condition of transportation in a way that the president of no single railroad can ever see; it is better informed on crops than the farmer or even the Department of Agriculture. In fact, the market reduces to a bloodless verdict all knowledge bearing on finance both domestic and foreign.
Much of the price movement reflected in commodity cash and futures markets is anticipatory; the expectations of the effects of economic developments. It is subject to change without notice. For example, a hurricane bound for the Philippines will send sugar prices higher, but if the storm turns off course, prices will drop back to prior levels. Major scheduled crop reports cause a multitude of professional guessing, which may correctly or incorrectly move prices just before the actual report is released. By the time the public is ready to act, the news is already reflected in the price.
PROFESSIONAL AND AMATEUR
Beginning traders often find a system or technique that seems extremely simple and convenient to follow, one that they think has been overlooked by the professionals. Sometimes they are right, but most often that method doesn't work. Reasons for not using a technique could be the inability to get a good execution, the risk/reward ratio, or the number of consecutive losses that occur. Speculation is a difficult business, not one to be taken casually. As Wyckoff said, "Most men make money in their own business and lose it in some other fellow's."
To compete with a professional speculator, you must be more accurate in anticipating the next move or in predicting prices from current news not the article printed in today's newspaper ("Government Buys Beef for School Lunch Program"), which was discounted weeks ago, and not the one on the wire service ("15% Fewer Soybeans and 10% More Fishmeal") which went into the market two days ago. You must act on news that has not yet been printed. To anticipate changes, you must draw a single conclusion for the many contingencies possible from fundamental data, or
1.Recognize recurring patterns in price movement and determine the most likely results of such patterns.
2. Determine the trend of the market by isolating the basic direction of prices over a selected time interval.【交易知识macd.org.cn收集整理】
