An Introduction to Technical Analysis/Realtime examples of Analysis

Thought it better to have the examples in one area so they can be followed and it doesnt clutter up threads on specific topics.---My mistake.

Update

Thanks again Tech. There's certainly a lot of thought in these posts! Keep up the good work!

Dumped PSD at 1c/share loss plus brokerage-----could have been worse.
GCL still holding in.

Dumped PSD at 1c/share loss plus brokerage-----could have been worse.
GCL still holding in.

tech, about GCL, wouldn't the safer trade have been to wait for a break of the red resistance line? I can see your logic in the triangle breakout though and you can always exit safely with minimal loss. volume is very useful in these situation imo.

tech, about GCL, wouldn't the safer trade have been to wait for a break of the red resistance line? I can see your logic in the triangle breakout though and you can always exit safely with minimal loss. volume is very useful in these situation imo.

Tech, I had the same question as Richkid did. It looks like the volatility is starting to settle and it may in that process of settling break the red resistance line. Having said that, it may just trade sideways. I think I would let time be my friend on this one.

Rich.

I didnt buy it for the Triangle breakout.
That came along later.
I bought it at $3.08 on the impulse day.
So the analysis is for whats happening NOW not why I took the trade.

Its certaintly a low probability trade and as Ive stated not a particularly good buy from a technical veiw.We all take trades like that.
Anyway Im in so I,ll trade it for what I can.
FCN was a nice pick up the week before.
I expect to make a profit not win them all.

Incedently I agree with you both it could range.
But it could also breakout to the upside again.
It could also fill the gap and breakdown.
Play it as its presented.

Rich.

I didnt buy it for the Triangle breakout.
That came along later.
I bought it at $3.08 on the impulse day.
So the analysis is for whats happening NOW not why I took the trade.

Its certaintly a low probability trade and as Ive stated not a particularly good buy from a technical veiw.We all take trades like that.
Anyway Im in so I,ll trade it for what I can.
FCN was a nice pick up the week before.
I expect to make a profit not win them all.

Incedently I agree with you both it could range.
But it could also breakout to the upside again.
It could also fill the gap and breakdown.
Play it as its presented.

Tech,
Okay, makes sense, good to see real time too, it's obviously easier for me to see all this after the fact. What's an impulse day?? I only know a bit about TA so looked for the big trend lines only.

Tech,
What's an impulse day??

Ill explain it in the BAR analysis thread as its a specific bar.

GCL very low volume but seeing that there are very few sellers taking higher offers.Slight increase in buyers saw price go a little higher.Raising stop to $3.13 a tick below the top of the triangle resistance.If stopped there will be a profit here plus the gap which has been good support will have been closed.

Just a point about stops demonstrated in the losing PSD trade.

Tech/a i'm only new to this forum, it was reading your post that i liked. you are using real charts which is exelent to be able to follow your analysis. It's great help thanks very much appreciated :knightrid

Thanks.

I'm just back from Singapore so will return to examples we can all follow as soon as my feet hit the ground.Have a few work matters to attend to.

I'll start again with a longer term trade example.

Trade position size and risk details.
Remember this is an exapmle of how I am trading this technically not a recommendation to buy.

Maybe only an example Tech, but a very nice looking chart.

I think one of the things beginners (myself included) find difficult is actually finding stocks with this type of chart.I have tried various combinations, moving average crossovers, volume etc etc in my searches only to have to plough through loads of no hopers to find even one worth looking into closer.

Maybe at a later stage you could give us some help with this :)

Porper.

I use a number of different Metastock scans.This came from a New high scan.
Im happy to post the formulas here if anyone has metastock and would find the formulas handy.Certaintly something one should look for in a charting package----the ability to scan for prospects.Saves hrs.

Could we have a bit of an intro on ledges please? (Different thread if it's worth it, is it a significant pattern??). Is it that last pattern of bars in the ADB set up? Does MRE have one at present? Does it mean buyers are propping upt the price but it's yet to break out, price compressing, kinda like a spring?? Just wondering, one of my weaknesses in analysis are the short term bar set ups that aren't as common as the trinagles and the like. Impulse bars were very interesting, ledges would be nice to know of too. Thanks in advance Tech.

Could we have a bit of an intro on ledges please? (Different thread if it's worth it, is it a significant pattern??). Is it that last pattern of bars in the ADB set up? Does MRE have one at present? Does it mean buyers are propping upt the price but it's yet to break out, price compressing, kinda like a spring?? Just wondering, one of my weaknesses in analysis are the short term bar set ups that aren't as common as the trinagles and the like. Impulse bars were very interesting, ledges would be nice to know of too. Thanks in advance Tech.

Ill do it under chart patterns although it will be out of sequence,no big deal.

Porper.

I use a number of different Metastock scans.This came from a New high scan.
Im happy to post the formulas here if anyone has metastock and would find the formulas handy.Certaintly something one should look for in a charting package----the ability to scan for prospects.Saves hrs.

Don't have metastock, but use incredible charts pro which has plenty of options for scans, well to me it does.I have just downloaded Amibroker to try for a month before buying, having trouble setting it up, not as user friendly as incredible charts, maybe just me not being a computer wiz.

I for one would be interested in your formulas, as I'm sure others would be too.The one thing I need to do is to back test, at the moment I cannot do this, hence the Amibroker download.

Well cant see how they will help (As you dont have M/S) but here is the one that picked up ABD.

HHVBars(H,42)=0 AND Fml("liquidity")>500000 AND C>Ref(C,-1) AND Cross(H,Ref(HHV(H,5),-1))

In English.

Highest high for 42 periods is Now---0 and
Liquidity is greater than $500000 and
This close is greater than the last. and
This high is crossing the value of the highest high over the last 5 periods
(To make sure the breakout to a new high is recient).

Ill do it under chart patterns although it will be out of sequence,no big deal.

Thanks Tech, look forward to it. If you think it's an important pattern and that there is enough material to post on it then a new thread may make it easier to follow (eg 'Chart Patterns- Ledges'). Upto you, will be good to see how they all fit in.

Well cant see how they will help (As you dont have M/S) but here is the one that picked up ABD.

HHVBars(H,42)=0 AND Fml("liquidity")>500000 AND C>Ref(C,-1) AND Cross(H,Ref(HHV(H,5),-1))

In English.

Highest high for 42 periods is Now---0 and
Liquidity is greater than $500000 and
This close is greater than the last. and
This high is crossing the value of the highest high over the last 5 periods
(To make sure the breakout to a new high is recient).

Haven't got a clue about the formulas used but your description is easy to understand, thanks for that.Will have to tinker a bit more, see if I can get better results in my scans.

Haven't got a clue about the formulas used but your description is easy to understand, thanks for that.Will have to tinker a bit more, see if I can get better results in my scans.

Porper,
I hope to fiddle with IC too as that's my only source of free regular data for ongoing chart study (apart from comsec). Other methods are not viable for me atm but IC does have some basic scanning options, not as sophisticated as MS though. I'll let you know if I succeed as I like IC too. Now if only Comsec could incorporate scanning in there protrader2.

does have some basic scanning options, not as sophisticated as MS though. I'll let you know if I succeed as I like IC too. Now if only Comsec could incorporate scanning in there protrader2.

Yes, it is very easy to understand RichKid, and it is fairly basic for scanning, but I am changing my view a little on how many indicators etc I need to learn, they all do a fairly similar thing, and why over complicate something for the sake of it.My newbie view at the moment, that may change of course as I get more educated.:biglaugh:

Yes, it is very easy to understand RichKid, and it is fairly basic for scanning, but I am changing my view a little on how many indicators etc I need to learn, they all do a fairly similar thing, and why over complicate something for the sake of it.My newbie view at the moment, that may change of course as I get more educated.:biglaugh:

Hi Porper,
My scanning would mainly be for breakouts to speed up the eyeballing process, scanning is not a big part of my trading atm. I only use some indicators and then only for fine tuning. Stochastics and money flow are more useful imo but it depends on the stock imo as some are useless compared to the actual price action.

TechA, how is your ADB trade going? Anything worth adding yet or a new candidate?

Porper.

Less is often more.

Rich

Today was the first day I'll comment on the trade shortly when I download todays action.Basically predictable ---I buy my buy falls---one of the best indicators I know.Tech buys everyone else sells!! Actually dropped 8c on close out.

Tech/a

Contrarian system??

Dutchie

Well today yes!

Tech/a

There are so many patterns etc for a newbie to digest.

Could you recommend the number of patterns a newbie should start with and which ones.

You know patterns and oscillator signals are actually over a long term little better than random--50/50.

Trick is evaluating them
(1) In the direction of the Trend your trading
AND
(2) When the market is moving in the direction of your intended position.

Keep these two tricks up your sleeve to maintain better than random results.

To the question.
I personally prefer shorter term patterns as they are the most powerful in the short term.They can and generally do indicate BLAST OFF.
The other great thing about them is they reveal failure very quickly which means for short term trades stops can and should be tight.

Infact a short term trade on ADB would be the ledge stop is at 1 tick below the bottom of the ledge.
These are patterns not to be confused with Bar setups like oops.

So in order of favorites.
Flags
Ledges
Consolidation Boxes (Rectangles and Squares.)
Pennants.

There are many more but these are the most powerful "Consolidation Patterns" in my veiw.
Couple the above 2 Tricks with these appearing at support or resistance and gap analysis( IE the price gaps away in your intended direction) and you have a very potent potential set up.

Gazing at 1000s of charts make them easy to see.

Hint (3)
Quick failure and reversal of price away from the pattern is VERY powerful EG the failure of the wedge in the UTB chart.

RICH sorry I'll get to patterns when I have enough time perhaps I'll do short and long term seperate showing continuation and reversal (Not failure) patterns at the same time.A lot to it!

Tech, thanks for the great work! Good question there Dutchie, Tech's answer has helped me clear some things up.

Tech, would you be able to give a general overview of the different timeframes for bar setups, short term setups and longterm setups as you alluded to earlier. ie which patterns are used in short term trades and which in position trading (eg trades lasting weeks not hours or days). This is probably elementary to you but I gave myself a kick in the rearend when I realised I'd messed it up. I suppose we'll have to define short term trading and med/position trading and longterm trading (I assume techtrader will use longterm setups/patterns). If we don't get the definitional issues sorted out things will get messy. I note Daryl Guppy is very good at defining these issues (eg Better Trading or Share Trading has references) and I have a feeling your methods assume the same timeframes.

You mention for example that in the ADB trade your stop is about 7% from your entry but a short term trade would have had it much higher just below the ledge (one tick I think is what you mention). Am I to understand that as the timeframe becomes shorter (eg med term trade vs day trader) the success rate drops and hence the losses add up so each loss has to be kept smaller, hence tighter stops. So the question now is which patterns are suited to short term trades (eg trades of a day or days rather than weeks) and which ones are better for med term trades (eg like position trading, weeks to months). It appears the Williams 'naked close' setup is very short term (a matter of days setup- ie it's all over in a few bars). I hope you get what I'm saying. I've just realised that I've been using medium term patterns to trade short term moves and hence have struggled with planning the trade. A wedge formation would generally take more than just a few days to pan out so using it for a three day trade would be silly. Does it make sense? Take your time, I know you're busy but I thought feedback may help give you an idea of where I'm coming from.

I also look at your tips about trading in the direction of the position and finding a pattern which corresponds to it for example as further risk reduction tools in the sense that it improves the success rate by reducing the randomness (theoretically). You mentioned for example that one of the Larry Williams bar set ups was a trade agains the trend and hence was riskier. So to increase the probability overall when trading short term patterns a trader could leave that pattern out of his ****nal/repertoire and only choose ones going with the trend- eg a pennant in an uptrend.

Phew! Hope it all makes sense. Look forward to your reply, I think it may be the case that charts alone won't help unless we know how to trade it overall, hence my questions about the concepts/strategy above. I need to get this clear in my mind.

Tech, would you be able to give a general overview of the different timeframes for bar setups, short term setups and longterm setups as you alluded to earlier. ie which patterns are used in short term trades and which in position trading (eg trades lasting weeks not hours or days).

I suppose we'll have to define short term trading and med/position trading and longterm trading (I assume techtrader will use longterm setups/patterns). If we don't get the definitional issues sorted out things will get messy. I note Daryl Guppy is very good at defining these issues (eg Better Trading or Share Trading has references) and I have a feeling your methods assume the same timeframes.



Rich
I'll do this as we discuss various aspects.But in general the reason to take any trade is that its expected to continue in the direction in which youve taken the trade.For me I want that to be an open ended timeframe---IE I'm not into trading corrective moves---nor am I into trading price objectives.
Both valid ways to trade---but to me (as I have traded both ways over the years)---its like catching a fly with tweezers.
I like catching Elephants with Giant nets.
Both of these shorter timeframe trading opportunities may from time to time appear in my trade ---But they are not "The Trade".

As for guppy.
I havent read any of his latest books but have spoken to him over the years (when he wanted me to write for his newsletter---I declined),but he is in my veiw one of the few SERIOUS educators and he rightly makes serious money for being good at it.

As for Techtrader.
I know only 3 methods which I can say with confidence I KNOW the NUMBERS. T/T is one of them so I trade it.
To trade without knowing the NUMBERS is a gamble.

Many good traders understand Reward to risk,many also understand win ratio's,most of these same traders then on each trade feel all wet and gooey placing trades with an UNPROVEN expectancy of 2-5:1.
By that I mean they place a risk against expected reward of say 4:1 but have never tested it over portfolios (10000 min) over years 6 min.

Simply they are missing 2 key elements and Ive mentioned they are missing 3 times now and no one has said well no I'm not because here they are---.
Without them I dont care what people THINK their R/R and % wins are you CANT know if your long term profitable.Setting up a trade to have an expectancy and or a % win wont guarentee profit.

So bottomline if your a discretionary trader your chance of longterm success is very limited.

You mention for example that in the ADB trade your stop is about 7% from your entry but a short term trade would have had it much higher just below the ledge (one tick I think is what you mention). Am I to understand that as the timeframe becomes shorter (eg med term trade vs day trader) the success rate drops and hence the losses add up so each loss has to be kept smaller, hence tighter stops. So the question now is which patterns are suited to short term trades (eg trades of a day or days rather than weeks) and which ones are better for med term trades (eg like position trading, weeks to months). It appears the Williams 'naked close' setup is very short term (a matter of days setup- ie it's all over in a few bars). I hope you get what I'm saying. I've just realised that I've been using medium term patterns to trade short term moves and hence have struggled with planning the trade. A wedge formation would generally take more than just a few days to pan out so using it for a three day trade would be silly. Does it make sense? Take your time, I know you're busy but I thought feedback may help give you an idea of where I'm coming from.

Rich.

Short term patterns can certaintly be used for trades that could last years.
Simply they are the door through which you enter a trade.
Regardless of what patterns appear during a trade its the TREND which determines your profitability,if ofcourse you stay with it long enough.

Short term trades tend to have a higher success rate that do longer term trades.The trade off is less reward.
One way which I feel best (from extensive testing of smaller timeframe trades) is to have tighter initial stops.
How tight??
Good question glad you asked!
Tight enough for the pattern to fail.Generally your interested in getting through the door with a setup.Its failure marks the END of the reason you took the trade and consequently the end of the trade.
Longer term trades tend to also use a 'trigger" for trade entry but generally has a stop governed more by % of Trading capital and as such can from time to time have such a wide stop that the pattern can collapse without the stop being triggered.This then means that the reason for being in the trade isnt the trigger that you used to enter but more the TREND itself.

Now on longer term trades stats show that you have around
9% total failure on a stop of 20% of purchase price.
23% total failure on stops at 10%
40 odd% on stops of 5%.
The trade off is TIME in trades.Only extensive testing will give you these answers and the NUMBERS you need.
So short term trades are going to see a stop of around 5-7% generally so success maybe 50-70%.

Now dont confuse profitable trades with initial stop %ages.
Losses can occur when exits are below the initial purchase price and above the stop.

As you can see we are only touching the very surface of this topic.
Time and questions such as yours and G's will flush out a great deal.

tech

Rich As for Techtrader.
I know only 3 methods which I can say with confidence I KNOW the NUMBERS. T/T is one of them so I trade it.
To trade without knowing the NUMBERS is a gamble.

Many good traders understand Reward to risk,many also understand win ratio's,most of these same traders then on each trade feel all wet and gooey placing trades with an UNPROVEN expectancy of 2-5:1.
By that I mean they place a risk against expected reward of say 4:1 but have never tested it over portfolios (10000 min) over years 6 min.

Simply they are missing 2 key elements and Ive mentioned they are missing 3 times now and no one has said well no I'm not because here they are---.
Without them I dont care what people THINK their R/R and % wins are you CANT know if your long term profitable.Setting up a trade to have an expectancy and or a % win wont guarentee profit.

So bottomline if your a discretionary trader your chance of longterm success is very limited.

Sounds like me! So what are the other two methods you mention (apart from TechTrader). As for expectancy etc maybe we should continue that part of the dicussion in the 3% thread? Perhaps you've mentioned it there already. I think I'm missing somethig here so I'll read that thread again.


Rich.

Short term patterns can certaintly be used for trades that could last years.
Simply they are the door through which you enter a trade.
Regardless of what patterns appear during a trade its the TREND which determines your profitability,if ofcourse you stay with it long enough.

As you can see we are only touching the very surface of this topic.
Time and questions such as yours and G's will flush out a great deal.

tech

Yep, certainly a lot to work through, thanks again, that has certainly cleared a lot up. Maybe in a few months (or years!) we can have a thread with some sort of summary. Maybe this can become the start of a book for you, if not to publish at least for you to go over or to pass on to the "Tech/a jnr's" in your family! Time for me to study this more, especially your old threads and some books.

So what are the other two methods you mention (apart from TechTrader).


Somethings Im afraid I'll keep for me.

Both are longer term methods
One revolves around Bollinger
The other around a tweeked parabolic SAR.

One is weekly and out performs all others.
Im yet to find a short term method which has the numbers which stack up.
They are there just that I havent found one yet.Havent looked real hard either.

I have 139 systems at my disposal---codes for---and have only tested 8.

Time a rare and depreciating commodity!

ENE broke out of a small Flag formation and looks like a potential short term discretionary trade.

I'll only comment on open trades weekly or if something happens.
ENE and ABD are the 2 on the go currently.

Updates

Well APN is now off the watchlist.
ENE looks like it was a good retracement trade but was to busy to see it,and trade it but will watch just for interest---stop at the low.
ABD treading water.

All in all trades are lack luster and so is the current market.
In these times buy triggers after buy signals are wise as are tight stops,no place for wide stops in a market like this.