|
|
|
|
|
| |
Price Forecasting
J-Chart's concept of time-independent analysis (Kinetic Equilibrium) along with its philosophy of "cause and effect of events" allows price forecasting
with remarkable accuracy. A Point of Origin and a Balance Point are used to project a future Image (Target) price, i.e. every event has its image and price is the
event. Accordingly, we can identify 3 main events that are used for making price forecasts:
- High
- Low
- Balance Point
Any of these 3 events of any interval can be used as a Point of Origin and a Balance Point of any (same or other) interval as the
second point in order to figure the corresponding Image Point.
|
Basics of price forecasting I
|
|
Balance Point A of the first interval and Balance Point B of the second interval result in Image (Target) Point 1.
Furthermore, connecting the High of the first period and the same Balance Point B of the second period result in another Target Price 2 which is
of course lower than Target Price 1. Accordingly, Target Price 2 will be reached once Target Price 1 was hit and provided that the market price does
not move above the High which is the upper edge of this balance (usually, it should not even go above the previous Balance Point A which was used as
the Point of Origin for identifying the first equilibrium).
If markets were efficient, they would also be logical. But as any trader knows, markets are neither totally efficient nor totally logical. The reason
is simple: markets are prone to the herd mentality. Herds rarely move efficiently, and they are certainly not driven by rational logic. They are more
likely to vacillate between periods of greed (when prices are driven up in the rush as people buy not wanting to miss out) and periods of fear
(when people realize they got carried away).
Even when driven by strong investor sentiment, markets must obey certain laws of energy. As Isaac Newton put it, "For every action there is an equal
and opposite reaction." Price moving upward too quickly must come back down and fill the areas it missed at some point. These areas show up on the
J-Chart display as voids or caves. If price moves too far in either direction, the equilibrium is broken and a new one must be formed.
|
Basics of price forecasting II
|
|
When setting price forecasts, the task is to determine what is more likely to occur — will the target that was set using the forecasting tool
with an image or marginal point and subsequent balance point be hit next, or will caves left empty from past sessions be filled?
Ultimately, the trader's experience and skill in reading the program provide him or her with the ability to decide.
|
|
|
|
