Understanding the building blocks of classical chart patterns can improve your analysis and trading results. Here’s how. Anyone who has studied or traded with classical chart patterns for several years knows the unmistakable feeling when a good pattern develops. The better patterns tend to stand out from the marginal ones, regardless of their shape or classification. This led me to realize that it was the similarities between chart patterns that were important, rather than the differences as defined by pattern names such as head-and-shoulders, triangle, and so on. It became apparent that a model was needed to bridge the gap between the minutiae of classical chart pattern definitions and the common features shared by chart patterns in general. Specifically, the model’s goals are to:
- Offset the lack of classical chart pattern specificity by providing a less subjective though still not entirely fixed criterion for identifying patterns.
- Serve as a notional benchmark for distinguishing valid chart pattern behavior from other types of market behavior, such as trending and exhaustion behavior.
- Minimize the risk of an implied directional bias by excluding the use of traditional “bull,” “bear,” or pat-tern shape terminology.
- Enhance the timing of trading decisions by more nar-rowly defining the specific behavior that coincides with chart pattern breakouts.
Continue reading Cycles, Volatility, And Chart Formations By Daniel L. Chesler
I have been intrigued by the commodity markets for many years. I have actively spent the last few years searching for the “whys” of market movement. I found the jiggle line concept on one such search. The concept is from George Bayer’s excellent book, GEORGE WOLLSTIEN: EXPERT STOCK AND GRAIN TRADER.
Continue reading The Jiggle Line By The Cosmic Cowboy
Cycles have fascinated traders for decades. This magazine frequently carries articles describing vanous cycles, especially astrocycles. But if cycles are so clear and obvious, why don’t cycle followers own everything? Maybe cycle aren’t as simple as they seem. Let’s take a look at cycles, and some new technology for trading them.
Figure 1, part A, shows an ideal cycle, such as might be found in a stock or commodity. It moves up and down between highs and lows. This cycle may be riding on top of an underlying trend, as shown. Now suppose we could extract the cycle without the trend, as in part B. If we then could measure how high the tops or bottoms were, we would know when this cycle was about to turn up (a buy) or turn down (a sell). If we marked high and low levels, we could call them buy and sell lines, as shown in part C. We could then use two very simple rules to guide our trading.
Continue reading Cycles Made Easy By Dr. Hans Hannula
Pythagoras was born the son of a gem- engraver in Italy in 582 B.C. He died at 82. He started his arcane school at Cratona with these purposes; to study physical exercises, mathematics, music and religio-scientiﬁc laws. Do you know that he laid out the musical scale of vibrations per second? All musical instruments are tuned to this A, the 440 vibrations pitch.
Do you know that 1/3/5 notes when played on the piano harmonize? You will ﬁnd 1/3/5/8 notes (8 is an octave – m music it is written as 8va). The 8th note is C again, a start of a new 1/3/5, only an octave higher. This will make 1/3/5/8/10/12/15 notes all harmonize. This is called a major chord. Any two or more of these notes in this 7 note combination will be in harmony with each other.
Continue reading Pythagoras and The Powers of 1-3-5 By Joe Rondinone
Recently I had the pleasure of teaching some 30 very bright, part time traders at Commodity Management Inc. of Chicago. These traders were certainly a cut above the average. They were above the norm in the two areas that count knowledge of technical analysis and a commitment to trading. The group consisted of men and women ages 18-60, covering the social and economic spectrum. On average they had been trading for three years plus, so definitely, they were not your typical “Beginners 101.”
Continue reading Mental Harmonics By Robert Krausz
Twenty-two years ago I began an investigation into the nature and history of money. The purpose was to satisfy a natural interest that wanted to understand everything about the idea of money. It was a spontaneous, intensive, self directed search for the Truth that lasted ﬁfteen years.
The end of this quest naturally transformed itself into the beginning of another: seeking an understanding of the movements of the markets. At this time, it may be of interest to the reader to know that I began this second quest in the same fashion as the ﬁrst: with focused intensity, self-direction and spontaneity.
Continue reading The Law Behind the Markets By Lee J. Franklin
How many points do you think you could take out of the S&P futures every day of the week? When we ask people this question they tend to say one, two, or perhaps even more. Well, it’s nice to dream but why not settle for just half a point a day from the S&P? Does that seem unreasonable?
The point is that if you can just make half a point every day, on average, you will be a millionaire at the end of fourteen months. Here’s how. Let’s assume there are 20 trading days in a month. You make half a point each day clear of the spread and commissions, the commission should be no more than $35. Each month you bring in $5,000. That is about half the amount you need to trade a single futures contract. At the end of the ﬁrst two months you have doubled your money. You started with $10,000, you trade a single contract, you end up with $20,000. So you have doubled your stake and for the third month you trade two contracts. You go for just half a point a day, on average.
Continue reading How Half a Point a Day Can Help You Rule the World By John Piper
Eclipses have been considered an omen of things to come from the earliest days of mankind. Many traders still consider eclipses to be signiﬁcant for the stock market while others ignore them completely. A great deal of confusion is generated on this subject, especially after the apparent failure of the widely advertised July 11, 1991 solar eclipse to have an effect on the market.
What do eclipses really mean for the stock market? First let’s start with the basics. Eclipses are a common occurrence of about four to seven each year. There are two kinds of eclipses: solar and lunar. The solar eclipse is a new moon where the moon’s orbit blocks the light from the sun. A lunar eclipse is a full moon where the moon passes through the earth’s shadow.
Continue reading The Power of Eclipses and Their Effects on the Market By David Wierzba
Unlike technical trading systems popular in the 1980s, artiﬁcial neural trading systems use an iterative “training” process to forecast prices and trading signals without rule-based “optimization” of system parameters or technical indicators. Instead, neural systems “learn” the hidden relationships within selected technical and fundamental data that are predictive of a speciﬁc market’s future price level.
This article examines the steps to follow in applying neural computing technology to the ﬁnancial markets. First, you need to specify the output that you want to forecast. You should identify the appropriate input data that the system needs in order to generate an accurate forecast. Then the type, size, and structure of your neural system must be deﬁned. Finally, the system has to be trained and then tested before it can be used as a predictive tool in real-time trading.
Continue reading How to Design an Artiﬁcial Neural Trading System By Lou Mendelsohn
The proper execution of your trades is one of the most[ fundamental components of becoming a successful trader and probably the most difﬁcult to learn. Most traders ﬁnd it is much easier to identify something in the market that represents an opportunity, than it is to act upon it. However, there are some very good psychological reasons why it is so difﬁcult to act on a trading signal. To understand these reasons, you need to understand the nature of trading systems (deﬁned as any methodology that consistently identiﬁes an opportunity to buy or sell with a potential proﬁt in some future moment) and how these systems interact with the markets and ourselves.
Continue reading Learning Flawless Execution of a Trading System By Mark Douglas