A practical guide to profiting from the proper use of sentiment indicators
In Sentiment Indicators, noted trading expert Abe Cofnas draws on his own trading and training experience as he shares his knowledge about the latest techniques and strategies for using Renko, price break, Kagi, and point and figure tools to successfully analyze all markets.
Written with the serious trader in mind, Sentiment Indicators offers key information on these potential-filled tools and how to use each in shaping trading strategies. Along the way, it provides a practical overview of how to implement these little-known indicators and why each can enhance your trading endeavors.
- Shows how these indicators work in different markets: futures, equities, forex, and others
- Provides a solid understanding of charting techniques and uses real-world examples to illustrate strategies and tactics
- Presents new sentiment research that analyzes word mining and what it means for markets
From historical context and Robot Trading alerts to the critical factors of a trading system, Sentiment Indicators presents a proven approach to trading that will help you identify conditions that have a high probability of profit.
Table of Contents:
Acknowledgments x
Introduction 1
The Decision Path of the Trader 3
1 The Geometry of Emotions and Price Action 9
Building Investor Emotional Intelligence 13
2 Price Break Charts: Key Concepts 15
High-Probable Entry Conditions 16
What are Price Break Charts? Basic Concepts 20
Reversal Distances: A Key Metric 31
Consecutive High and Low Close Sequences 32
Is the Reversal Serious? 36
3 General Trading Strategies for Applying Price Break Charts 39
Trading in the Direction of the Trend after a Counterreversal Block 39
Join the Trend after the Appearance of the First or Second Reversal Block 42
Fibonacci Resistance Confirmation 43
Countertrend Scalper 44
Always-In Strategy 45
Flip-Flop Reversal Entry 45
Momentum Trading—Six-Line Break 47
Price Break and Volume Data for Equity Charts 48
Multiple Setting Intervals and Price Break Charts 50
4 Applying Price Break Charts to Markets and Data 53
S&P 500: Price Break Chart Patterns Using the Day Chart 53
Crude Oil and Price Break Charts 54
Microdetection of Sentiment Reversals—The Use of Price Break Charts for Momentum Trading 57
Price Break and Tick-Level Price Action 59
Six-Line Breaks and Fibs 59
5 Channel Patterns, Cycles, and Price Breaks 61
Cycles and Price Break Charts 63
6 Multiple Market Applications of Price Break Charts 65
Contemporaneous Visual Correlation of Instruments 65
Volatility and Price Break Charts 69
Price Break Charts and Sentiment Data: Innovative Applications 72
Price Break Charts and the Global Financial Crises 76
7 Price Break Charts and Option Trading 91
Selecting Direction with Price Break Charts 91
Selecting the Strike Price 92
Risk Reversal Price Break Charts Analysis for Currency Traders 95
Price Breaks and Currency Volatility Smiles 98
8 Renko Charts Revived: The Microdetection of Sentiment 105
What is Renko Charting? 106
Tactical Trading Rules for Renko Charts 112
Key Components of a Renko Charts Trade 113
Step 1: Renko Chart Setting Sizes and Time Intervals 115
Step 2: Select Chart Time Interval: Use Three Time Intervals 120
Step 3: When a Trade Enters the Average Target of Profitability, Turn On the Renko Charts 121
Time and Bricks 122
Renko Charts and Economic Data Release Trading 124
Using Renko Charts to Enter Positions 129
Renko Charts in Multiple Markets 132
Renko Charts and Six-Line Break: Tools for the Scalper 132
Renko Bricks at the Tick Level 138
Renko and Volume 138
9 Kagi Charts: Waiting for the Turn of Sentiment 141
Kagi Chart Basics 141
Buy and Sell Signals with Kagi Charts—When Yin Turns to Yang 146
Kagi Charts: The Keys to the Turn of Sentiment 148
Quantifying Kagi Charts 151
Kagi versus Candlesticks—Which is Better? 152
10 Point and Figure Charts 155
How Point and Figure Charts Work 155
Variations in Settings in Selected Markets 162
Combining Chart Types 170
11 Integrating Price Break, Kagi, Renko, and Point and Figure Charting 183
Using the Price Landmark Matrix 183
12 New Directions in Sentiment Analysis: Charting Words 227
Decreasing Frequency Comparison 234
13 Beyond the Trend: Cycle Indicators Independent of Time 251
Cycle Detection and Projection 252
Epilogue 265
Index 267
About the Author :
ABE COFNAS is the forex trading columnist for Futures magazine since 2001 and has written over 100 columns on forex trading strategies and tactics. He is also the author of two Wiley titles, The Forex Trading Course and The Forex Options Course. He has, for over two decades, provided fundamental and technical analysis on trading strategies in currencies and inter-markets. He is the founder of learn4x.com, which provides private coaching and seminars on currency trading. In 2008, he formed FXDimensions Inc., a third-party trading system and signal development company that has pioneered the concept of Trading Avatars. He is a recognized expert in technical analysis and has lectured in London and Dubai (with appearances on CNBC Arabia) and continues to work with students and businesses abroad. Mr. Cofnas holds a master's in political science, and a master's in public policy from the University of California, Graduate School of Political Science, and the Goldman School of Public Policy, at the University of California, Berkeley.
