Description
Book SynopsisA self study exam preparatory guide for financial technical analysis certifications Written by the course director and owner of www. tradermasterclass.
Table of ContentsForeword xiii
Preface xv
Acknowledgments xxi
About the Author xxiii
Chapter 1 Introduction to the Art and Science of Technical Analysis 1
1.1 Main Objective of Technical Analysis 1
1.2 Dual Function of Technical Analysis 3
1.3 Forecasting Price and Market Action 3
1.4 Classifying Technical Analysis 11
1.5 Subjectivity in Technical Analysis 16
1.6 Basic Assumptions of Technical Analysis 30
1.7 Four Basic Assumptions in the Application of Technical Analysis 39
1.8 Market Participants 40
1.9 Chapter Summary 42
Chapter 1 Review Questions 43
Chapter 2 Introduction to Dow Theory 45
2.1 Origins and Proponents of Dow Theory 45
2.2 Basic Assumptions of Dow Theory 46
2.3 Challenges to Dow Theory 62
2.4 Chapter Summary 64
Chapter 2 Review Questions 64
Chapter 3 Mechanics and Dynamics of Charting 65
3.1 The Mechanics and Dynamics of Charting 65
3.2 Gap Action: Four Types of Gaps 72
3.3 Constant Chart Measures 73
3.4 Futures Contracts 89
3.5 Chapter Summary 97
Chapter 3 Review Questions 98
Chapter 4 Market Phase Analysis 99
4.1 Dow Theory of Market Phase 99
4.2 Chart Pattern Interpretation of Market Phase 104
4.3 Volume and Open Interest Interpretation of Market Phase 112
4.4 Moving Average Interpretation of Market Phase 115
4.5 Divergence and Momentum Interpretation of Market Phase 116
4.6 Sentiment Interpretation of Market Phase 118
4.7 Sakata’s Interpretation of Market Phase 119
4.8 Elliott’s Interpretation of Market Phase 120
4.9 Cycle Analysis Interpretation of Market Phase 122
4.10 Chapter Summary 124
Chapter 4 Review Questions 124
Chapter 5 Trend Analysis 125
5.1 Definitions of a Trend 125
5.2 Quality of Trend: 16 Price Characteristics Impacting Future Price Action and Trend Strength 132
5.3 Price and Trend Filters 144
5.4 Trend Participation 145
5.5 Price Inflection Points 148
5.6 Trendlines, Channels, and Fan Lines 155
5.7 Trend Retracements 166
5.8 Gaps and Trends 166
5.9 Trend Directionality 168
5.10 Drummond Geometry 169
5.11 Forecasting Trend Reversals 170
5.12 Chapter Summary 171
Chapter 5 Review Questions 171
Chapter 6 Volume and Open Interest 173
6.1 The Mechanics of Volume Action 173
6.2 Volume Oscillators 203
6.3 Chapter Summary 208
Chapter 6 Review Questions 208
Chapter 7 Bar Chart Analysis 209
7.1 Price Bar Pattern Characteristics 209
7.2 Price Bar Pattern Characteristics 211
7.3 Popular Bar Reversal Patterns 218
7.4 Volatility‐Based Breakout Patterns 230
7.5 Chapter Summary 233
Chapter 7 Review Questions 233
Chapter 8 Window Oscillators and Overlay Indicators 235
8.1 Defining Indicators and Oscillators 235
8.2 Eight Ways to Analyze an Oscillator 240
8.3 Cycle Period, Multiple Timeframes, and Lagging Indicators 252
8.4 Input Data 253
8.5 Trend Trading Using Oscillators 255
8.6 Window Oscillators 255
8.7 Overlay Indicators 262
8.8 Chapter Summary 266
Chapter 8 Review Questions 266
Chapter 9 Divergence Analysis 267
9.1 Definition of Divergence 268
9.2 General Concept of Divergence 272
9.3 Standard and Reverse Divergence 291
9.4 Price Confirmation in Divergence Analysis 323
9.5 Signal Alternation between Standard and Reverse Divergence 337
9.6 More Examples of Divergence 338
9.7 Chapter Summary 354
Chapter 9 Review Questions 355
Chapter 10 Fibonacci Number and Ratio Analysis 357
10.1 The Fibonacci Number Series 357
10.2 Fibonacci Ratios 359
10.3 Fibonacci Retracements, Extensions, Projections, and Expansions 363
10.4 Fibonacci (Φ‐Based) Percentage Retracement Levels within an Observed Price Range 368
10.5 Fibonacci (Φ‐Based) Percentage Extension Levels beyond an Observed Price Range 375
10.6 Fibonacci (Φ‐Based) Percentage Expansion Levels beyond an Observed Price Range 379
10.7 Fibonacci (Φ‐Based) Percentage Projection Levels from a Significant Peak or Trough 384
10.8 Why Should Fibonacci Ratios or Numbers Work at All? 388
10.9 Geometrically versus Numerically Based Fibonacci Operations 389
10.10 The Fibonacci Trader’s Technical Toolbox 392
10.11 Area of Application 394
10.12 Selecting Effective Inflection Points for Fibonacci Operations 396
10.13 Fibonacci, Dow, Gann, and Floor Trader’s Pivot Point Levels 397
10.14 Probability of Continuation and Reversal in Fibonacci Retracements and Extensions 400
10.15 Fibonacci‐Based Entries, Stoplosses, and Minimum Price Objectives 400
10.16 Fibonacci Two‐ and Three‐Leg Retracements 402
10.17 Fibonacci Fan Lines 409
10.18 Fibonacci Channel Expansions 412
10.19 Fibonacci Arcs 414
10.20 Supportive and Resistive Fibonacci Clusters 415
10.21 Potential Barriers in Fibonacci Projections 417
10.22 Fibonacci Time and Ratio Projection Analysis on Elliott Waves 417
10.23 Chapter Summery 431
Chapter 10 Review Questions 431
Chapter 11 Moving Averages 433
11.1 Seven Main Components of Moving Averages 433
11.2 Nine Main Applications of Moving Averages 451
11.3 Chapter Summary 462
Chapter 11 Review Questions 463
Chapter 12 Envelopes and Methods of Price Containment 465
12.1 Containing Price Action and Volatility about a Central Value 465
12.2 Adjusting Bands for Effective Price Containment 475
12.3 Methods of Price Containment 477
12.4 Chapter Summery 492
Chapter 12 Review Questions 492
Chapter 13 Chart Pattern Analysis 495
13.1 Elements of Chart Pattern Analysis 495
13.2 Preconditions for Reliable Chart Pattern Reversals 499
13.3 Popular Chart Patterns 502
13.4 Chapter Summery 540
Chapter 13 Review Questions 540
Chapter 14 Japanese Candlestick Analysis 541
14.1 Elements of Candlestick Analysis 541
14.2 Popular Candlestick Patterns and Their Psychology 555
14.3 Integrating Candlestick Analysis 578
14.4 Filtered Candlesticks 583
14.5 Trading with Candlesticks 584
14.6 Chapter Summary 588
Chapter 14 Review Questions 588
Chapter 15 Point‐and‐Figure Charting 589
15.1 Basic Elements of Point‐and‐Figure Charts 589
15.2 Basic Point‐and‐Figure Chart Patterns 600
15.3 Point‐and‐Figure Minimum Price Objectives 619
15.4 Bullish Percent Index and Relative Strength 623
15.5 Chapter Summary 624
Chapter 15 Review Questions 624
Chapter 16 Ichimoku Charting and Analysis 627
16.1 Constructing the Five Ichimoku Overlays 627
16.2 Functional Aspect of Ichimoku Overlays 633
16.3 Advantages and Disadvantages of Using Ichimoku Charting 643
16.4 Time and Price Domain Characteristics of Ichimoku Overlays 644
16.5 Basic Ichimoku Price‐Projection Techniques 649
16.6 Chapter Summary 649
Chapter 16 Review Questions 650
Chapter 17 Market Profile 651
17.1 The Search for Fair Price or Value 651
17.2 The Daily Profile Formations 665
17.3 Chapter Summary 671
Chapter 17 Review Questions 671
Chapter 18 Basic Elliott Wave Analysis 673
18.1 Elements of Elliott Wave Analysis 673
18.2 Rules and Guidelines 676
18.3 Motive Waves 676
18.4 Corrective Waves 678
18.5 Wave Extensions and Truncation 682
18.6 Alternation 683
18.7 Wave Equality 683
18.8 Fibonacci Ratio and Number Analysis of Elliott Waves 684
18.9 Chapter Summary 684
Chapter 18 Review Questions 684
Chapter 19 Basics of Gann Analysis 687
19.1 Techniques of W. D. Gann 687
19.4 Chapter Summary 710
Chapter 19 Review Questions 711
Chapter 20 Cycle Analysis 713
20.1 Elements of Cycle Analysis 713
20.2 Principles of Cycle Analysis 720
20.3 Additional Cyclic Characteristics 724
20.4 Tuning Oscillator and Overlay Indicators to the Dominant Cycle Period 725
20.5 Identifying Price Cycles 726
20.6 Chapter Summary 731
Chapter 20 Review Questions 731
Chapter 21 Volatility Analysis 733
21.1 The Concept of Change and Volatility 733
21.2 Some Statistical Measures of Price Volatility 743
21.3 Other Measures of Market Volatility 754
21.4 Chapter Summary 757
Chapter 21 Review Questions 757
Chapter 22 Market Breadth 759
22.1 Elements of Broad Market Action 759
22.2 Components of Market Breadth 762
22.3 Market‐Breadth Indicators in Action 765
22.4 Chapter Summary 777
Chapter 22 Review Questions 777
Chapter 23 Sentiment Indicators and Contrary Opinion 779
23.1 Assessing the Emotion and Psychology of Market Participants 779
23.2 Price‐Based Indicators versus Sentiment Indicators 783
23.3 Assessing Participant Actions 784
23.4 Assessing Participants’ Opinions 788
23.5 Chapter Summary 791
Chapter 23 Review Questions 791
Chapter 24 Relative Strength Analysis 793
24.1 Measuring Relative Performance 793
24.2 Chapter Summary 811
Chapter 24 Review Questions 811
Chapter 25 Investor Psychology 813
25.1 General Behavioral Aspects 813
25.2 Behavioral Elements Associated with Chart Patterns 815
25.3 Behavioral Elements Associated with Market Trends 817
25.4 Behavioral Aspects of Market Consolidations 820
25.5 Behavioral Aspects of Market Reversals 821
25.6 Chapter Summary 823
Chapter 25 Review Questions 823
Chapter 26 Trader Risk Profiling and Position Analysis 825
26.1 Fulfilling Client Objectives and Risk Capacity 826
26.2 Aggressive and Conservative Market Participation 827
26.3 Categorizing Clients according to Term Outlook and Sentiment 835
26.4 The Seven Participatory Options 838
26.5 Triggers, Signals, Price Targets, and Stoplosses 838
26.6 Confirming and Non‐Confirming Price Action and Filters 841
26.7 Collecting, Categorizing, and Organizing Technical Data 843
26.8 Multi‐Timeframe Confirmation 845
26.9 Reconciling Technical Outlook with Client Interest 846
26.10 Hedging Positions with Derivatives 847
26.11 Chapter Summary 847
Chapter 26 Review Questions 847
Chapter 27 Integrated Technical Analysis 849
27.1 The Integrated Components of Technical Analysis 849
27.2 Classification of Clusters and Confluences 854
27.3 Chapter Summary 877
Chapter 27 Review Questions 877
Chapter 28 Money Management 879
28.1 Elements of Money Management 879
Chapter 28 Review Questions 912
Chapter 29 Technical Trading Systems 913
29.1 Conceptualizing a Trading System 913
29.2 Basic Components of a Trading System 915
29.3 System Testing and Optimization 915
29.4 Performance Measurement 919
29.5 Chapter Summary 920
Chapter 29 Review Questions 920
Appendix A Basic Investment Decision Making Based on Chart Analysis 923
Appendix B Official IFTA CFTe, STA Diploma (UK), and MTA CMT Exam Reading Lists 933
About the Test Bank and Website 937
Index 939
