An Introduction to Technical Analysis/Chart Patterns/Interpretation/Implementation

[tech/a]

Thought I,d move into the area of Technical Patterns---in here we will also look at GAPS and how to trade them.

Firstly Patterns like any technical (Or Fundamental) analytic tool can and do fail.Most agree that patterns are no better than a random formation on a chart.We wont get involved in the arguement here other than to realise that all and any analysis must have solutions to failure as well as success!!

We will look at Continuation patterns and Breakdown/Reversal patterns.
How to interpret them----measure them---and practical analysis to look at how to trade them.----Setting of Stops---price targets(Measured Moves) and breakdown stratagies.This is a long interesting and varied topic.

Must Reads and standard library requirements.

The BIBLE of Technical analysis.

Technical Analysis of Stock Trends---Edwards and Magee
ISBN 0-13-904343-8

Not far behind.

Technical Analysis of the Futures Markets---John Murphy.
ISBN 0-13-898008-X

We will start with Interpretation of TRENDLINES and SUPPORT and RESISTANCE.

Then move to Major CONTINUATION Patterns.

Triangles---Flags---Pennents---Wedges---Rectangles---Diamonds among others

Later we will look at Reversals and Consolidation Patterns

Through out the discussion if I or anyone else finds a pattern in a chart unfolding please put it up as a SEPERATE chart discussion---so we can work through it as it unfolds---this is great experience.

[DTM]

I'm looking forward to this one. This will be one of my favourites.

Thanks again for your time Tech. :)

[tech/a]

First lets look at Primary Trends and how they can effect our analysis.

Next Short term and Intermediatary Trends.

[tech/a]

Tips to trading great trends.
Look for the following characteristics as a trend developes and be aware that all good trends come to an end.
Here are some examples of Trend analysis.
Note the wedge in the second chart (UTB) sloping AWAY from the short term downtrend.This is a bearish chart!The options players would like this one.

Might ask Wayne how he would play it.

[tech/a]

Sorry Ive been pretty busy.
I'll be back in a few weeks so will crank it up again soon.
Great trading everyone.

[ezyTrader]

Hi tech/a,

I am reading your articles with great relish. Would you still be continuing on the articles? (if time permits) ;)

[tech/a]

So little time.
Will try to do the odd one as time permits.
To many discussions then there is that pesky problem of running a company!

[pharaoh]

Thanks tech/a for starting this thread
Will read when I get home

I for one am trying to start my TA knowledge, starting in forex a few days ago, so appreciate it

[shane1987]

Hi,

I am new to trading and would like to learn about technical analysis. Can anyone recommend any books that are useful for my purposes?

Any assistance is much appreciated.

[tech/a]

Hi,

I am new to trading and would like to learn about technical analysis. Can anyone recommend any books that are useful for my purposes?

Any assistance is much appreciated.

The most commonly asked question by those interested in T/A.

After 16 yrs of studying everything from Oscillators to Market Profile to VSA
I strongly suggest you firstly decide what you want from T/A.

There are 2 things.
(1) to be able to read a chart in context with where its been so you can anticipate where its going---discretionary Trading.
(2) To be able to understand various entry/exit and stop criteria so you can formulate a trading methodology which can be tested and if successful traded.

Personally (2) should be your first goal and (1) your second.
You'll learn more about what DOESN'T work in T/A from testing ideas and Hypothesis than from trading those same Ideas and hypothesis.


I would pick a type of T/A which can be quantified and tested.
The one I have settled on as the best I have seen so far is VSA.

Many other forms have their place but for purely Chart analysis there is a lot to be gained from VSA and its correlating components.

Todd Kruger's stuff on the topic is second to none in my opinion.
Unfortunately its a long road.Interesting though!

[shane1987]

Thank you for your reply tech/a.

I tried to find Kruger's material on the web, however I was unsuccessful in doing so. Could you please direct me to the relevant link?

Thanks.

[tech/a]

Thank you for your reply tech/a.

I tried to find Kruger's material on the web, however I was unsuccessful in doing so. Could you please direct me to the relevant link?

Thanks.

http://www.traderscode.com/


Tradeguiders book
"Master the markets " is worth knowing as well.

http://www.tradeguider.com/mtm_251058.pdf
Ebook.

[sinner]

I would pick a type of T/A which can be quantified and tested.
The one I have settled on as the best I have seen so far is VSA.


Agreed on VSA, although I would say quantifying it is more difficult than other T/A methods.

One of my favs for futures trading is Tom Demark Trendlines. If you google "TDTL.pdf" it is the first hit.

[tech/a]

Agreed on VSA, although I would say quantifying it is more difficult than other T/A methods.

One of my favs for futures trading is Tom Demark Trendlines. If you google "TDTL.pdf" it is the first hit.

I agree.
A lot is sadly missing from those who bring these methods to the public.
I will admit that advanced get and e signal have done a far better job than most with Elliot Wave methods and trading.

But even so both fall short--VSA more so tha AGET---in the quantifying--- application---and finally testing arena's.

I intend to do some extensive work on this which will take a great deal of time.In the end I believe that I will have a number of proven or disproven methodologies based around VSA and its confirming indicators/chart patterns.

[Frank D]

You can’t quantify it. You can only quantify known things (indicators/systems) or known
patterns (methods) that are predetermined in advance.

Trying to work out the imbalance of supply and demand, which is what
VSA tries to do without a known pattern is not ideal

VSA should be used as a filtering tool as the last variable after the pattern
has already been established

Work on your patterns first and foremost, and then incorporate a filtering tool.

[tech/a]

You can’t quantify it. You can only quantify known things (indicators/systems) or known
patterns (methods) that are predetermined in advance.

Well yes you can


Trying to work out the imbalance of supply and demand, which is what
VSA tries to do without a known pattern is not ideal

There are many patterns from single bar to multiple bar and volume "Patterns"


VSA should be used as a filtering tool as the last variable after the pattern has already been established

Well the VSA pattern/s should confer with other pattern/s.


Work on your patterns first and foremost, and then incorporate a filtering tool.

No argument there other than there are Patterns with VSA ---many.

[It's Snake Pliskin]

[QUOTE=sinner;586926]Agreed on VSA, although I would say quantifying it is more difficult than other T/A methods.

One of my favs for futures trading is Tom Demark Trendlines. [QUOTE]

I like his stuff, but not easy for a beginner without some tech/a knowledge. Everything of his is trademarked, too.

Todd Kruger, love his stuff.

Frank that is a good post you wrote.

[sinner]

You can’t quantify it. You can only quantify known things (indicators/systems) or known
patterns (methods) that are predetermined in advance.


Errrrrrr...

So you are saying I can quantify a narrow range bar (say, narrowest of the last 10) at a 100 bar low...

but I can't quantify a narrow range bar at a 100 bar low with lowest volume of the last 50 bars? Pinbar at 100 bar high with highest volume of last 50 bars?

I am just pulling parameters and numbers out of my ****, but you get the idea of my question, why exactly is it, that I can do one but not the other?

[Frank D]

why exactly is it, that I can do one but not the other?

Quantify the pattern to see if it works first without volume. The pattern
has to work using historical evidence. Without evidence you're pissing in
the wind.

The idea is then to improve the pattern by optimising it (increase the
known edge) using individual rules or a trading plan.

So what is the known pattern?

you are trading a breakout of an XX bar high

Volume will then then tell you whether to trade it, how much exposure,
or whether you want to sit it out:- filtering tool.

[Synergy]

Quantify the pattern to see if it works first without volume. The pattern
has to work using historical evidence. Without evidence you're pissing in
the wind.


I think you're looking at volume in isolation to price movement rather than in conjunction with it. The same candles on a chart can be read in many ways depending on the volume of each bar.

Volume and price need to be looked at as one, so the testing needs to be done as such.