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Study Guide for The New Trading for a Living by Dr. Alexander Elder

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THREE

Classical Chart Analysis

The original chartists had a revolutionary idea—to use price and volume data rather than fundamental factors for deciding what and when to buy and sell.

Each fundamental analyst has to specialize in a fairly narrow field. Technical analysis, on the contrary, is universal. Once you understand the principles of charting, you can apply them to stocks, bonds, currencies, futures, or any other market. As the number of trading vehicles around the globe increases, technical analysis is becoming more popular.

As long as you have the data on high, low, opening, and closing prices, along with that on volume and open interest, you can make intelligent judgments about the balance of power between bulls and bears in any market. Then you can trade in the direction of the dominant market group.

In this chapter you'll be asked to make trading decisions using charts. It's relatively easy to recognize patterns in the middle of a chart, but good trading signals are much harder to identify near the right edge. That's where you'll have to make your trading decisions—amid the uncertainty, noise, and tension of the markets.

Questions Trial 1 Trial 2 Trial 3 Trial 4 Trial 5
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Correct answers

 

Question 3-1

  1. Match the following two sets of statements regarding prices.

    1. The high of the day
    2. The low of the day
    3. The closing price
    4. The opening ...

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