7 Chart Patterns - Discount Investment and Stock Market Trading
There are two camps in the trading and investing world: Fundamental Analysis and Technical Analysis. If you are investing with “fundamentals,” you will be interested in a company’s balance sheet, product focus, and other prospects for earnings growth.
Fundamentals work great, but the problem is, which fundamentals? Stocks with astronomic price to earnings ratios, like Amazon, keep going higher. Stocks with bad news but sound books and products go down. Trading with such information is just downright hard especially when the market isn’t going up.
Since the day I first started trading some 20 years ago, I’ve been fascinated and awed by the power of Technical Analysis and Charting. According to my studies and from talking with Nirvana customers, successful traders use technical methods—almost exclusively. Chart patterns work! Why?
Because human behavior repeats itself. There are two forces at work: greed and fear. What you see in charts is the transition between investor elation and terror.
Seven Chart Patterns That Consistently Make Money is purposely not a long book. I have seen chart books that went on and on for 200 pages or more. You don’t need that much information. After studying the markets for 20+ years, I have come down to these seven patterns as the key predictors of direction, in any market.
We use our product, OmniTrader, to prospect for trading candidates, but it doesn’t matter what method you are using—if you confirm your entries with these simple patterns, you will be light-years ahead of the average investor. Best of luck in all your trading endeavors.
Contents
Preface. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Introduction
Different Charts and How to Read Them . . . . . . . . . . 13
Chapter 1
THE POWER OF TECHNICAL ANALYSIS. . . . . . . . . . . . 15
Trading vs. Investing: Choose One and Profit From It. . 15
The Power of the Short Side . . . . . . . . . . . . . . . . . . . 20
$10,000 to $1 Million in One Year . . . . . . . . . . . . . . . 23
Do Technical Analysis and Charting Work? . . . . . . . . . 26
The Formula for Success in Trading. . . . . . . . . . . . . . 27
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Chapter 2
THE SEVEN CHART PATTERNS FOR
SUCCESSFUL TRADING. . . . . . . . . . . . . . . . . . . . . . . . 29
Computers Can’t See Everything…. . . . . . . . . . . . . . . 29
Chart Patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Chapter 3
CHART PATTERN 1: Support and Resistance. . . . . . . . . 31
Chapter 4
CHART PATTERN 2: Trendline Break and Reversal . . . . 35
Chapter 5
CHART PATTERN 3: Saucer Formations . . . . . . . . . . . . 39
Chapter 6
CHART PATTERN 4: Fibonacci Retracements. . . . . . . . . 43
Chapter 7
CHART PATTERN 5: Gaps
(Breakaway, Measured, Exhaustion) . . . . . . . . . . . . . . . 45
Chapter 8
CHART PATTERN 6: Volume Climax, Volume Trend. . . . 47
Chapter 9
CHART PATTERN 7: Consolidations
(Flags and Triangles) . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Chapter 10
PREDICTING MARKET DIRECTION . . . . . . . . . . . . . . . 55
About SignalWatch.com . . . . . . . . . . . . . . . . . . . . . . 55
Why the Dow? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Consolidations Are Magic!. . . . . . . . . . . . . . . . . . . . . 57
What Will the Dow Do Tomorrow? . . . . . . . . . . . . . . 59
Chapter 11
TRADING THE MOVES WHILE MINIMIZING RISK . . . . 61
The Golden Exit Rule . . . . . . . . . . . . . . . . . . . . . . . . 61
Setting Stops to Minimize Risk . . . . . . . . . . . . . . . . . 62
Maximizing Profits on Every Trade . . . . . . . . . . . . . . 65
Put the Odds in Your Favor! . . . . . . . . . . . . . . . . . . . 68
Closing Thoughts . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Trading Resource Guide . . . . . . . . . . . . . . . . . . . . . . . . . 71
