ASX Charting Course

Chapter 1

Introduction

This is intended to be the A-Z guide to charting futures commodities and indices, from trendlines to the Capital Flow distribution theory and everything in between. Each fortnightly instalment will cover a new indicator, technique or facet to a broader theory.

In the old days, before the internet, charts were generally drawn by hand, maintained on a daily, weekly and monthly basis and one had to be at least proficient in technical drawing to draw efficient usable charts. Then came the analysis, mostly done with a ruler, pencil and calculator. As you could imagine, the number of charts one could maintain was limited by the considerable time required for such maintenance, not to mention the limited number of indicators one could compute manually.

These day's we're much luckier, computer charting packages and online charts make analysis more accessible to everyone, they have even spawned new indicators. Now there are almost too many indicators available. There are numerous systems one can use, there are a number of indicators and many more combinations of indicators. Fuzzy logic and neural networks, which became popular in the 1990's, have yet again taken charting analysis to a new dimension.

And still the futures markets defy any holy grail method of chart analysis and there's a lot more to being a successful futures trader than just being a good analyst. But this is a charting course and the intention is to teach how to construct and analyse charts, all different kinds of charts.

Sometimes there are numerous outcomes depending on who is doing the analysis, for example for this instalment we are dealing with trendlines and some traders will say, 'buy off an uptrend line', while others will say 'sell on a break of the up trendline'. Both are right. It actually depends more on the type of trader you are and your intended time frame.

Trendlines are the original basic tool of a chartist and therefore it's right and logical that we start there, but first some terms common to all traders and vital to the chartist.

An old adage – 'Trendlines are there to be broken.'