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Friday, June 5, 2009

Reading the Market with Historic Data

Many experts say that the market works in cycles and thus can predict future trends by analyzing historic market data. While the first saying often found correct the second one is always challenged. Many traders, says that we can’t read/predict market trends based on historic market movements and performances. There are many reasons for this.
  1. Ten or twenty years before there are not so much technology-based or technology-driven companies as now.
  2. New trading instruments like exchange traded funds (ETFs) and other funds, and complex option trading strategies are not much popular before.
  3. There was lesser number of day traders than now, who by virtue of their number and trading volume can control/enhance intraday and daily price trends.
  4. Traders as a whole was not supplied with advanced trading systems loaded with customizable charting and plenty of indicators.
  5. No high amount of investor money was invested in pension funds and mutual funds as today.
  6. There was no much correlation/co-ordination of domestic and foreign markets, and also of stock, commodity and forex markets.
But still, we can drive some vague conclusions based on historic market performances. We today have got great research tools and indicators to analyze and confirm our conclusions. Making use of them in the right way together with strict trading strategies can help to maximize profit and to minimize risks.

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posted by NobleTrading at 9:16 AM

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