THT’s Market Analysis – Part 1

Hello and welcome to The Hovis Traders Market Analysis series

I intend to analyse market action of late and try to dumb it down into an understandable process, looking at a variety of trading concepts, using charts only. Also I won’t be covering everything in detail so there may be aspects not fully covered – remember I don’t read or look at the economic news, political decisions or the like, I’m not concerned with it in any of my trading decisions.

The overall aim is to explain my interpretation of recent and present market action into tradeable strategies and techniques – there’s little point being 100% correct on the markets if you don’t profit from that analysis!  (before any comments are made – NO ONE and I mean NO ONE is right on market direction 100% of the time – NO ONE) Like I’ve said before find me a trader who’s 100% correct all the time and I’ll happily pay them 50% of my lifetime profits using their strategy – facts are at best you can expect to be right 80% of the time and within that 80% you’ll make some mistakes which reduces it even further.

There is a multitude of trading possibilities out there – for a start there’s 100+ indicators available and you could make a trading strategy using any combination of them – straight away the combinations of potential possibilities is massive!

My Market Analysis series may take a few weeks to publish ( I don’t write this blog as a priority), they’ll be in order and sequenced – I won’t publish anything else until there finished and after this series of Market Analysis I plan to produce and publish a series of Market Education posts.

This year I feel thoroughly justified at taking most of July off to watch the greatest Cycle race in the world ( The Tour de France) Bradley Wiggins did and achieved what I had dreamt of doing as a 10 year old, it gives me immense pride to finally have the first ever Britain to hold onto the Yellow jersey for so long and win so convincingly – well done Bradley

OK let’s begin:

We’ll look at the S&P500 Index (see chart below) which covers just over a years worth of data of DAILY price bars – again I’m not bothered about looking at Candlesticks, I’m happy using bar charts as they tell me all I want to know.

Chart 1

As we can see over the past year prices have moved quite a bit, BUT if you took June 2011 – June 2012 there was no growth for the buy and hold investor – this is why I trade.

Next chart please,

Chart 2

Clearly shows downtrends and uptrends – I classify an uptrend as a series of higher highs and higher lows – although there are times when even this definition fails and catches you out.

Chart 3

See the RED box over the Price?  At that point a fall like that can happen from a number of things, 2 or them are that more sellers entered the market than buyers and prices were driven down hard and fast OR it might just of been the case that NO buyers entered the market forcing prices to fall until such a point as buyers were found.

Hope this makes sense as you will often read in the Press that the bears won over the bulls – this is not always the case as markets can freefall just because there’s NO buyers left wanting to buy, the sellers might not be selling!

I’ve not highlighted the other points that this might of occurred as they are evident from the chart.

Take a closer look at any of the 3 charts, look at the bars.  Each bar = 1 days trading, it tells you the Open, the High, the Low and the Close

I realise that we’re looking at PAST market data, I’m not helping you to make market predictions, I’m trying to show you what markets, how they work etc so that you can build that into a workable strategy and technique.

A lot of people get killed trying to predict the markets next price level, by understanding what the market is capable of you can at least prepare yourself

Right, that’s enough for this tutorial part 1, there’s still loads to cover and the next posts explore deeper as I realise that Part 1 is very very basic.

Part 2 will look and focus in depth on Elliott Wave analysis

Until later….

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