Most of the trading rules and studies in technical analysis have been devised to detect and catch trending markets. One of the trend follower's goals is to trade markets that have better than average potential to trend, and try to stay out of markets which are in the congestion or especially the random phase. Trend following methods have been developed using trading rules based on moving averages, chart patterns, and many other kinds of technical studies.

The same trend following rules that were hugely successful during this time period did not always work as well in the ensuing period of the mid-and late 80's. The latter markets were less trendy and not as volatile, and became more congested or random. More studies are now being developed to trade congestion markets, since they have become more common. The theory of chaos, which is a branch of mathematics and science, is now being investigated for possible use in trading.

Since markets and times change, historical trading rules or "time­tested methods" should be used as flexible guideposts for further study. You should include personal experiences and your own creativity in developing a set of trading rules, instead of considering the standard technical rules as inviolate laws. The ultimate trading rule is more a figment of one's imagination than a reality.

Markets are the reflections of people's hopes and dreams. Certain aspects of markets, like greed and fear, do not appear to change because people always seem to have these kinds of timeless traits. Other aspects of markets, like trends and volatility, do change because people have other kinds of traits and beliefs which change in time. Proper market timing is important in any type of trading, but is absolutely critical to successful futures trading. The leverage in futures is much greater than in other markets, so the profits and losses and to get magnified more quickly. It is not enough to know whether the market is going up or down. An investor who is correct about market direction may still consistently lose money because the entry and exit points of trades may not be timed correctly. It is equally and sometimes more important to know when the market may go up or down.

The importance of timing brings up one of the main distinctions between technical and fundamental analysis. Fundamental analysis 18 essential to understanding the economics and driving forces which affect the market. This knowledge may help the investor to make better informed trading decisions. Fundamental analysis does not always provide the best time to initiate or exit a trade, because the analysis is often broad and general in scope. For example, after studying the fundamentals of the coffee market in early May, an Investor expects a decline in prices.

When should the investor enter the market, and where should protective stops be placed to limit risk ?The investor is considering selling in the middle of May, but hesitates, because there are rumors of a frost or drought which could cause the market to rally. However, If the investor waits and the market drops precipitously, the entire move will be missed. The investor goes short at 120, but watches the market rise in late May to 125. When the market drops in early June, the investor decides to cover at 120 and break even on the trade, but unfortunately, misses the ensuing down move. Has this ever happened to you or someone you know?

In many cases, the fundamental analysis may have been excellent, and the market eventually went in the direction anticipated. But, an Investor who has the correct fundamental perception of a market may not necessarily make money trading because the timing may be off. The trade may be entered too early, too late, or not at all In order to take advantage of the fundamental information.

Inherent in the study of technical analysis is a means and study of the timing of entry and exit points for every trade. The studies in technical analysis provide a framework in developing trading methods that are based on entering and exiting the market at specific times. Most technical studies do not address the question of why things happen, or the fundamental aspects of the market. Instead, they are more concerned with analyzing different market patterns, to assess the best risk/reward characteristics and the timeliness for a trade.

The preceding discussion is not meant to suggest that technical analysis will always provide the best entry and exit point for a trade. Anyone who has used technical analysis is familiar with the phrase "false breakout" or other terms synonymous with being whip­sawed or losing money in a trade. However, technical analysis employed effectively can assist the trader in the decision process of Improving entry and exit points in any trade.

Successful trading is a combination of correct assessment of market direction and proper timing of entry and exit. One of the main benefits of technical analysis is that it provides a means of liming entry and exit points for trading.