Comprehensive, accessible guide to technical analysis and market trading strategies Essentials of Technical Analysis for Financial Markets is an all-encompassing handbook on navigating the financial markets successfully using technical analysis. Clearly written, easy-to-understand, and straightforward, this guide focuses on the key information needed by traders and investors to take on any financial market effectively.
- Easy-to-use, at-your-fingertips information on using technical analysis to trade all major financial markets
- Explains how to navigate the markets successfully, including the top techniques for entries, exits, and risk management
- Straightforward descriptions of proven technical trading methods and strategies
- Filled with technical analysis insights, charts, and examples
With financial markets in "roller coaster" mode, technical analysis offers a unique advantage for managing risk and finding high-probability trading opportunities. Packed with insightful tips and guidance, Essentials of Technical Analysis for Financial Markets provides proven trading strategies from one of today's top technical strategists.
Table of Contents:
Preface xiii
Acknowledgments xvii
1 Introduction to Technical Analysis: Pursuing Profit in the Financial Markets 1
What Is Technical Analysis? 2
Technical versus Fundamental 2
Methods 5
What to Expect 5
Summary 9
2 The Story of Technical Analysis: From the Japanese Rice Markets to Dow Theory to Automated Trading 11
The Beginning: Japanese Rice Markets 12
Dow Theory 14
Charting 17
Elliott Wave 18
W. D. Gann 20
Indicators 20
Trend Followers 22
Market Technicians Association 23
Technical Analysis Today 23
Summary 24
3 The Power of Technical Analysis: Principles of Price Action 27
Introduction to Price Action Concepts 28
Components of Price Action 29
Summary 32
4 The Basics of Technical Analysis: Bars, Candlesticks, Lines, and Point and Figure 33
Bars and Candlesticks 34
Line Charts 37
Point-and-Figure Charts 38
Summary 40
5 The Heart of Technical Analysis: Uptrends and Downtrends 41
Introduction to Trend 42
Effect of Time Frames on Trend Determination 50
Parallel Trend Channels 52
Trend Lines 54
Summary 55
6 The Soul of Technical Analysis: Support and Resistance 57
Introduction to Support and Resistance 58
Support Becomes Resistance Becomes Support 60
Summary 64
7 Primary Drawing Tools: Trend Lines, Trend Channels, and Horizontal Support and Resistance 65
Introduction to Drawing Tools 66
Static Support and Resistance 67
Dynamic Support and Resistance 72
Horizontal Support and Resistance Lines 78
Trend Lines 81
Parallel Trend Channels 87
Summary 89
8 Chart Patterns: Bar Shapes and Candlestick Formations 91
Introduction to Chart Patterns 91
Continuation Bar Patterns 93
Reversal Bar Patterns 102
Gaps 106
Candlestick Patterns 110
Single-Candle Patterns 111
Multiple-Candle Patterns 116
Summary 118
9 The World of Moving Averages 119
Introduction to Moving Averages 119
Moving Average Crossovers 123
Moving Averages as Support and Resistance 131
Summary 134
10 Key Technical Indicators and Oscillators 135
Introduction to Indicators and Oscillators 135
Key Indicators 139
Key Oscillators 148
Summary 159
11 Fibonacci and Elliott Wave 161
Fibonacci Theory and Methods 161
Elliott Wave Theory 170
Summary 175
12 Point-and-Figure Charting 177
Introduction to Point and Figure 177
Point-and-Figure Patterns 181
Point-and-Figure Price Targets 188
Summary 190
13 Volume 193
Introduction to Volume 193
On-Balance Volume 196
Tick Volume 198
Summary 199
14 Technical Trading Strategies: Practical Applications 201
Introduction to Technical Trading Strategies 202
Moving Average Crossovers 203
Breakout Trading 212
Trend Trading 224
Range Trading 238
Price-Oscillator Divergences 244
Oscillator Trading 249
Fibonacci Trading 254
Positive Expectancy 256
Summary 258
15 Risk Control and Money Management 261
Introduction to Risk Control and
Money Management 262
Stop-Losses 263
Reward:Risk Ratio 266
Maximum Allowable Loss 269
Multiple Fractional Positions 271
Diversification 273
Summary 273
Index 277
About the Author :
JAMES CHEN, CTA, CMT, is Chief Technical Strategist at FX Solutions, a global leader in foreign exchange trading. An expert on technical analysis and financial market trading, he is also a registered Commodity Trading Advisor (CTA) and a Chartered Market Technician (CMT). Mr. Chen contributes daily and intraday technical analysis to key financial media, is a frequent speaker at trading seminars, and has authored numerous articles on trading strategies and technical analysis in major financial publications. His previous book, Essentials of Foreign Exchange Trading (Wiley), has become an industry-standard guide for currency traders.
