Renato Di Lorenzo Basic Technical Analysis of Financial Markets A
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Renato Di Lorenzo Basic Technical Analysis of Financial Markets A Modern Approach Springer Contents Part I 1 Graphical Representation 3 1.1 Zig-Zag 3 1.2 Bar Charts 7 1.3 Candles 9 1.4 Candlevolume 9 1.5 Equivolume 11 1.6 Point and Figure 13 1.7 Kagi 16 1.8 Renko 18 1.9 Three Line Break 20 1.10 Range Bars 21 1.11 HeikinAshi 22 1.12 Validation 24 1.13 The Scales 28 1.14 TypeofPrice 30 2 Trend Analysis 33 2.1 Linear Trends 33 2.2 Cuts 38 3 Targets 43 3.1 Fibonacci Numbers 43 3.1.1 Sam Numbers 47 4 Filtering 51 4.1 SMA 51 4.2 Optimization 55 4.2.1 Buy/Sell Instructions 55 4.2.2 Date: For Example from 8.8.2010 to 8.8.2011 56 4.2.3 Initial Capital: Say 200.000 EUR or USD Depending on the Market Traded 57 XV xvj Contents 4.2.4 Commissions 57 4.2.5 Maximum Total Commitment: 100 % 57 4.2.6 Maximum Total Commitment Per Transaction: 100 % 57 4.2.7 Minimum Total Commitment Per Transaction: 1 % 57 4.2.8 Profits Reinvestment 57 4.2.9 Round Off the Number of Securities and Contracts to the Next Higher Whole Number 58 4.2.10 The Simplest Trading System 58 4.2.11 Optimization 61 4.3 EMA 66 4.4 Other Moving Averages 69 4.5 WMA and WMAS 70 4.6 RMA 75 5 Oscillation Periods 79 5.1 A Measure via RMA 79 6 Stop Loss 83 6.1 The 5 % System 83 7 Advanced Moving Averages 85 7.1 Dema and Tema 85 7.2 Zero Lag 89 7.3 Adaptive Moving Averages 92 8 Bands and Bundles 99 8.1 Bollinger Bands 99 8.2 B&CB 102 8.3 Envelops 104 8.4 Bundles 107 8.5 Guppy Bands 109 9 Other Indicators Superimposed on the Price 111 9.1 Parabolic Sar 111 9.2 Chande Kroll Stop 112 9.3 Ichimoku 116 Summary of Part I 119 Part II 10 The Classical Figures 123 10.1 The Figures in General 123 10.2 Multiple Maxima and Minima 123 Contents xvii 10.3 Rectangles 125 10.4 Rectangle Deformations 126 10.5 Triangles 127 10.6 Head and Shoulders 128 10.7 Wedge, Flag, and Other Similar Figures 130 10.8 Gap 132 10.9 Conclusions on the Classic Figures 133 11 Japanese Figures 135 11.1 General Information 135 11.2 Doji 135 11.3 Hanging Man 138 11.4 Hammer 138 11.5 Shooting Star 138 11.6 Composite Figures 138 11.7 A Conclusion Regarding the Japanese Figures 141 12 Basic Oscillators 143 12.1 Generalities 143 12.2 RSI 143 12.3 Dynamic Zone RSI 148 12.4 MACD 152 12.5 MACD Zero Lag 156 12.6 Stochastic 159 12.7 Stochastic Momentum Index 165 13 Drawdown 167 13.1 Definition and Usage 167 14 Volumes 169 14.1 Accumulation and Distribution 169 14.2 Negative Volume Index and Positive Volume Index; ROC 173 14.3 Chaikin Money Flow 177 14.4 Chaikin Oscillator 179 14.5 Money Flow 180 14.6 On Balance Volume 182 14.7 Price Volume Trend, ROC and VROC 183 14.8 Volume Oscillator 186 15 Other Oscillators 189 15.1 Momentum 189 15.2 The Chande Momentum 191 15.3 Directional Movement System 194 15.4 Aroon 200 15.5 Cycle 203 xvüi Contents 15.6 Commodity Channel Index 205 15.7 Detrended Price Oscillator 209 15.8 Eider Ray 212 15.9 Mass Index 214 15.10 Accumulation-Distribution by Larry Williams 216 15.11 TRIX 216 15.12 Linear Regression 218 Summary of Part II 221 Part III 16 Screeners 225 16.1 Generalities on Screeners 225 16.2 SMA 228 16.3 EMA 228 16.4 WMAS 229 16.5 RMA 230 16.6 Dema 231 16.7 Tema 231 16.8 Zern Lag 232 16.9 Kama 233 16.10 B&CB 234 16.11 Envelops 235 16.12 Parabolic Sar 236 16.13 Chande Kroll Stop 237 16.14 RSI 237 16.15 Dynamic Zone RSI 238 16.16 MACD 239 16.17 MACD Zero Lag 240 16.18 Stochastic 242 16.19 Accumulation Distribution 243 16.20 Negative Volume Index and Positive Volume Index 244 16.21 Chaikin Money Flow 244 16.22 Money Flow 245 16.23 On Balance Volume (OBV) 246 16.24 Price Volume Trend 246 16.25 Volume Oscillator 247 16.26 Momentum 248 16.27 Momentum: Chande 248 16.28 Directional Movement System 249 16.29 Aroon 250 16.30 Cycle 250 16.31 Commodity Channel Index CCIc 251 16.32 Eider Ray 252 Contents xix 16.33 TRIX 253 16.34 Linear Regression 254 Appendix A: System Validation 255 Appendix B: Downloading the Data 259 Appendix C: ATR 261 .