PRN: Can You Use Past Market Data to Predict Future Price Movements?
Can You Use Past Market Data to Predict Future Price Movements?
LONDON, September 23, 2011 /PRNewswire/ --
Last year MarketWatch reported that the Dow Jones Index has witnessed a fall every September since it was established. The pattern is convincing, but it begs the question: is past data a reliable guide to the future?
Sandy Jadeja is Chief Technical Analyst of award-winning spread betting provider City Index (http://www.cityindex.co.uk/), where he frequently leads free technical analysis seminars from the company's London offices, believes that some patterns can be used to trade the markets effectively: "There are some very reliable time patterns that can be used. For example, the Dow Jones has declined from 28 December to 22 January in the last 12 years, so knowing this can be useful because it can help a trader prepare for a potential opportunity in advance."
"In this example, a simple trigger would be a break below a weekly low after 28 December. Of course, trade management is of high importance to prevent large losses."
Whether using charting or any other form of market analysis, traders should always use risk management tools such as stop losses and limit orders to close their trades automatically when the market reaches set price points.
Mr. Jadeja summarises: "Generally speaking, patterns are not perfect. But they can be considered a sensible way to make decisions as long as risk management and money management techniques are applied."
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