Index

Page numbers followed by n indicate note numbers. A Arnott, Robert, 391 Ascending pattern, 140–141 AB model. See Abreu-Brunnermeier model Asks (offers), 8 Abreu-Brunnermeier (AB) model, 481–482 Aspray, Thomas, 223 Absolute breadth index, 327–328 ATM. See Automated teller machine Absolute difference, 327–328 ATR. See Average trading range; Average Accelerated trend lines, 65–66 true range Acceleration factor, 88, 89 At-the-money, 418 Accumulation, 213 Average range, 79–80 ACD method, 186 Average trading range (ATR), 113 Achelis, Steven B., 214n1 (ATR), 79–80 Active month, 401 Ayers-Hughes double negative divergence AD. See Chaikin Accumulation Distribution analysis, 11 Adaptive markets hypothesis, 12, 503 Ayres, Leonard P. (Colonel), 319–320 implications of, 504 ADRs. See American depository receipts ADSs. See American depository shares B 631 Advance, 316 Bachelier, Louis, 493 Advance-decline methods Bailout, 159 advance-decline line , 322 Baltic Dry Index (BDI), 386 one-day change in, 322 Bands, 118–121 ratio, 328–329 trading strategies and, 120–121, 216, 559 that no longer are profitable, 322 Bandwidth indicator, 121 to its 32-week simple moving average, Bar chart patterns, 125–157. See also Patterns 322–324 behavioral finance and pattern recognition, ADX. See Directional Movement Index 129–130 Alexander, Sidney, 494 classic, 134–149, 156 Alexander’s filter technique, 494–495 computers and pattern recognition, 130–131 American Association of Individual Investors learning objective statements, 125 (AAII), 520–525 long-term, 155–156 American depository receipts (ADRs), 317 market structure and pattern American FinanceCOPYRIGHTED Association, 479, 493 MATERIALrecognition, 131 Amplitude, 348 overview, 125–126 Analysis pattern description, 126–128 description of, 300 profitability of, 133–134 fundamental, 473 Bar charts, 38–39 Andrews, Dr. Alan examples of, 38–39 pitchfork, 72, 73 Baruch, Bernard, 577 Apex, 139, 181 Base, 139 Appel, Gerald, 227 Base currency, 413–414 Arithmetic moving average, 100 Bearish resistance lines, 70–71, 249, 256 Arithmetic scale, 42 Bear markets, 20 Arms, Richard W., Jr., 206, 331 cyclical, 570 Arms Index, 331–332 trade setups, 304 632 index bindex

632

Breakouts, 60, 76–83 Breakaway gaps, 163 Breadth indicator, 316, 608–609 Box size Box range, 251 “Box” pattern, 135–136 “Bowl” pattern, 149–151 Bowles, Samuel, 15 Bounded/unbounded, 323 Bounded, 202 Bonds, 386–387, 391 Bollinger, John Bogle, John, 578 Bloomberg Barclays U.S. Aggregate BondIndex, Black, Fischer, 479–481, 493 rules Binary Biggs, Barton, 576 Beta, 79, 465 Benchmarks Behavioral finance, 502–503 confirmation of,confirmation 76–82 buy signal, 119, 120 anticipation of, 82–83 of,characteristics 320 variable, 274–277 charting,in point-and-figure 259–263 examples of, 261, 262, 263 based onamultiple oftheaverage range, true based onafixed percentageofprice, bands, 118, 119, 216, 559 thresholds and, 557–558 from multiple thresholds, 558–560 of,description 467 evaluation,use inrule 561–567 detrending market data, 565–566 value investing and, 472–473 recognition and,pattern 129–130 overview, 469–470 objective statements,learning 469 human nature and, 584–585 to,forerunners 469–473 folklore of traders, 470–472 financial news and, 473 opinionand,contrary 592–594 issuers of,issuers 392–393 fixed incomesecurities, 391 debt securities, 391 275–276 274–275 387

Buy signals, 256 Busted rectangles, 137 Bull markets, 20 lines,Bullish support 70, 249, 256 Buffett, Warren, 574, 591 Bubbles, 453–454, 482 days,Broad ranging 269 Broadening pattern, 143–146 Breakout trading, 62 Capital asset pricing model(CAPM),Capital assetpricing Candlevolume 208 charts, patterns,Candlestick 187–198 40–41, charts, Candlestick 242–251 Call option, 418, 426–428 Calahan, Edward, 30 Cadbury, Chris, 582–584 C compound point-and-figure, 256, 257 trade setups, 304 models of, 479n6 of, 79–80 targets, tosetprice using price 134 stops forfalse breakout, 91 stops and, 90 specialist, 91, 92 ratio for,risk/return 95–96 overview, 75, 76 level of, 76 objective statements,learning 75 false andpremature, 136 failure of, 128 interpretation of, 465–467 equation, 464–465 as anacceptedtheory, 467–468 results from, 197–198 one- andtwo-bar, 189–194 wick, 40 shadows, 40 real body of, 40 overview, 242–244 of,origination 243 objective statements,learning 242 example of, 41 constructing, 246 instructions, 245–247 charting basic market strategies, 247–251 advantages of, 243 463–468 No vember 8, 2019 2:42PM index 633 vember 8, 2019 2:42 PM 8, vember No xvi–xvii 611 385, 511 222, (CFTC), and commitment indicators about, ix about, xiii curriculum, and question weightings, exam topics xiii I content selections, Level xv I exam, Level xi program, 130–131 pattern and, recognition 201–204 methods, analysis 204 classic patterns, 22–23 concept of, 204 crossovers, 203 divergences, 24 examples of, 202 swings, failure 200 learning statements, objective 221–224 open interest, 202 overbought/oversold, 200–201 overview, price 224–239 confirmation, 203 reversals, 203–204 ID, trend 205–221 confirmation, 605 as economic indicator, 576 versus S&P 500 Index, 432 of, date expiration 33–34 linked, CMT Association, Association, CMT 474 141–142 pattern, “Coil” 402 (COT), Traders Commitments of 317, Commodities Research (CRB), Bureau 235–236 Index (CCI), Commodity Channel Commission Trading Commodity Futures 611 Commodity Price Index, Composite chart, 361 612–613 Composite model, See also Software Computers. 200–241 Confirmation, See also Trends 53. Congestion area, 184 182–183, Larry, Connors, See also Trends 53. Consolidation, 357 Consumer Price Index (CPI), 401 33–34, Continuous contract, Contracts See also Consensus 592–594. Contrary opinion, 224–225 Convergence, 379 bonds, Convertible Volatility See Volatility index Commission of gaps and classic patterns, 167–169 classic patterns, of gaps and 580–584 investors, of successful 608 indicator, as economic 147 description of, 122 121, Donchian, 252–277 point-and-figure charting, of 473–474 prices, 28–29 benefits of, 208 candlevolume, 31 computer programs for, 32–34 constructiondata and, 27–28 description of, 1 of, and analysis development 206–208 Equivolume, 31 example of prices, 27–44 history construction and of, history charting, 29–32 of 27 learning statements, objective 27–29 overview, 42–44 scale for, 34–41 types of, Capital asset pricing See Capital model CAPM. Case studies Index Volatility Cboe NASDAQ-100 Cboe Volatility Index. Channel Index See Commodity CCI. See Certificates of deposit CDs. 533–534 Central tendency, Exchange See Cboe Futures CFE. Trading See Commodity Futures CFTC. 213 Marc, Chaikin, 213 Distribution (AD), Accumulation Chaikin 215 Flow, Chaikin Money 216 Chaikin Oscillator, 87 “Chandelier Exit,” 476 Kevin, Chang, 251 Change of polarity principle, 121–122 68–69, 61, Channels, 333 Award, Dow Charles H. Charting Charts 254 Trade, Chicago Board of 577 254, Chicago Mercantile Exchange, 33 Citigroup, 204 Classic patterns, 172 16, 146–149, Climax pattern, 76–78 Close filter, 161 Closing price, 296–298 160, Cluster,

633

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Directional movement, 113–116, 559–560 Diffusion indicator, 569n8 Diamond toppattern, 144–146 DeVillers, Victor,252–253 Desmond, Paul F., 333 pattern,Descending triangle 139–140 Derivatives, 131 DeMark, Tom, 82, 55 Decline, 316 Decelerated trend lines, 66 (DCB)pattern, DCB. SeeDeadcat bouncepattern Davis’ Law, 588 Davis, E., Robert 256, 258 Data filters, 375 Dark cloudcover pattern, 193–194 Daily ratio, price 566–567 D Cyclicality, 349 Cycle theory, 347–356 Cycle harmonics, 349 Cryptocurrencies, 415–416 “Cup” pattern, 149–151 “Cross-Section” paper(Fama andFrench), 467 Crossings, 607–610 CRB. Bureau SeeCommoditiesResearch Cradle, 139 Crabel, Toby, 174, 176–177, 183 CPI. Index SeeConsumerPrice SeeCommercialpaper P. C Cowles, Alfred III, 16 Countertrends Corrective waves, 287–292 curve,Coppock 340–341 Coppock, Edwin “Sedge,” 340 Cootner, Paul, 630 using indicators for,using indicators 114–116 of,description 113 for, indicators constructing 113 trading, 146 identifying, 301 zigzag, 288 triangle, 289–292 flat, 289 combination, 292 types, 347 definition, 348 169–171, 220 Druckenmiller, Stan, 576 Drop-off effect, 228–229 , 15–26. SeealsoTrends Downtrend, 5–6 Downs, Walter,181–182 Dow Jones Transportation Average (DJTA), Dow Jones Industrial Average (DJIA), 3–4, 10, Dow, CharlesH., 10, 11, 15, 200, 252 Double topanddouble bottompattern, Double divergences, 321 Dormier, Buff, 220 Donchian, Richard, 121 star, 194 Doji pattern, 189 DOE. ofEnergy SeeDepartment Dodd, David, 472 DMI. SeeDirectional movement indicator DJTA. SeeDow Jones Transportation Average DJIA. SeeDow Jones Industrial Average Divergences, 203, 224–225 Directional trends, 62–70 Directional movement indicator (DMI), 108 Directional Movement Index(ADX), 300 volume importance, 23–25 trend types, 20–25 motion,trends in price 19–20 theorems, 18–25 trend,secondary 21 trend,primary 20 overview, 15–18 minor trend, 21–22 objective statements,learning 15 ideal market picture, 18 of,criticisms 25 concept,confirmation 22–23 gaps and, 162 channel, 122 breakout method, 62 ranks, 620–621, 626–629 positive, 315 negative, 315 double negative, 319–322 double, 321 of,description 315 uptrends, 63–68 of,description 62–63 line, 115–116, 236–239 588–589 317, 329, 588–589 134–135 No vember 8, 2019 2:42PM index 635 vember 8, 2019 2:42 PM 8, vember No (EMA), 105–107 (EMA), spectrograms, 353–354 spectrograms, 354 diagrams, wavelet 354–355 Fisher transform, definition, 410 definition, 408–409 ETNs, ETFs vs. clusters, 296–298 clusters, 295–296 dividers, 294 equality, 294–295 multiples, 287–292 relationships, 293–294 retracements, 155 trading, 592–595 contrary opinion and, minimum risk of, 48 riskminimum of, 33 trading, 108–109 variable, F 231 202, swings, Failure 615–616 F., Eugene Fama, 109 average, moving FAMA 67 66, line, Fan 71 Fibonacci ratio, 613 470, 340, Financial crisis of 2008, 219 Fiscal policy, 471 Irving, Fisher, 354–355 Fisher transform, cycleFixed tools 153–154 Flags, 308 5, trend, Flat 559 Flip-flop, 584–587 570–573, Forecasting, 412 exchange, Foreign Forex,412 Equivolume, 206–208 Equivolume, charts, 206–208 Errors See Exchange-traded funds ETFs. 194–195 star pattern, Evening 170 decline, Event 317 205, Exchange-traded funds (ETFs), 166 Ex-dividend gaps, 166 Exhaustion gaps, 84 Exit stop, average smoothed moving Exponentially 223 (EMA), average Exponential moving 409 Exchange-traded notes (ETNs), 407–410 Exchange-traded (ETPs), products Analysts Societies Analysts 453–460 18, 454–456 hypothesis, average Exponential moving average; capital asset pricing model, 463–468 capital asset pricing model, 496–497 about, controversy 454 definition of, 460 disagreement with, 459 against, evidence false information and the efficient market 461 453, learning statements, objective 461–468 model and, market 456–458 martingale and, hypothesis 453–454 overview, 456–458 rulerandom walk and, risk 461–463 and return, 456 455, version of, semi-strong 455–456 formstrong of, 494–501 testing of, 454–455 form of, weak 305–309 guidelines, 304 setups, 116–118 percentage, 120–121 trading strategies and, 379 bonds, convertible 378–379 preferred stock, 378 warrants, 324 description of, E 219 (EMV), movement Ease of Thomas, Edison, 30 of Financial Federation European See EFFAS. 16, 11, Hypothesis (EMH), Markets Efficient Index See Elder Force EFI. 109 John, Ehlers, 341–342 80/60 rule, 218 Index (EFI), Elder Force principle See also Wave 302. 281, N., R. Elliott, 347 analysis, Elliott wave trade Elliott wave smoothed moving Exponentially See EMA. Hypothesis Efficient Markets See EMH. 61 E-mini futures, 13 Emotional feedback, See EMV. 191–193 Engulfing pattern, 84 Entry stop, Envelopes 376 Equity, Equity line

635

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636

GMO. SeeGranthamMay, Van Otterloo&Co. GMA. moving SeeGeometric average mean,Geometric 536–537 movingGeometric average (GMA), 108 GDP. See Gross domesticproduct Gartley, H. M., 209 Gaps, 162–169 Gann, W.D. Galbraith, John Kenneth, 571 G FX, 412 Futures market, 401–403 Futures contract, 33 Futures, 174 Funnel, 143 Fungibility Fundamental analysis, 473 Front month, 401 Friedman, Milton, 477–478 Fractal, 9 “Four-week breakout system,” 62 Four-bar sellpattern, 176 suspension, 166 stops and, 90 runaway, 166 patterns, 167–16 opening, 164–166 minor, 166 measuring, 166 explosion gappivot, 166 exhaustion, 166 ex-dividend, 166 example of, 91 of,description 162 closed, 90 breakouts and, 142 breakaway, 163 two-day swing method, 57–59 fan lines, 72–74 prices,stock 458 index markets, 317 e-mini, 61 back-adjusted, 274 and,noise traders 475–477 identical thingsand, 476–477 patterns, 12–13 of,description 127 computer-generated, 10 Hurst, J.M., 348 Hughes, James F., 320 pattern, 173,Horn 174 count,Horizontal 270–272 Hook reversal day, 177 Homma, Munehisa, 243 Holy Grail, 239 Hindenburg Omen, 338–340 Hikkake pattern, 177 High volume method, 58–59 High-probability trade, 545 PayoffHerrick Index(oscillator), 223 John,Herrick, 223 Herd instinctmodels, 478, 479–482 periods, cycle 358 Heliocentric Hedging, 419 pattern,Head andshoulders 151–153, 476, 477 Harmonicity, 349 Hard asset Harami pattern, 190 manpattern,Hanging 190–191 Handle, 149 Hammer pattern, 190–191 Hamilton, William Peter, 11, 17, 18, 19, H Gross domesticproduct (GDP) Greenspan,573 Alan, Granville, Joe, 591 Graham, Benjamin, 472 Gould, Edson, 71 Goodspeed, Bennett, 584 Goldman Sachs, 317 Golden Ratio. SeeFibonacciratio Golden Mean. SeeFibonacciratio Impulse waves, 305–306 Implied volatility (IV), 422 IMF. Fund Monetary SeeInternational ICE. SeeIntercontinentalExchange I buy failure, 178 trading, 153 performance, 392 indexes, 392–393 growth of, 578–573 as economicindicator, 605 498–500 No vember 8, 2019 2:42PM index 637 vember 8, 2019 2:42 PM 8, vember No traders 105 109 knockout pattern, 179–180 knockout pattern, 472 1934), Acts (1933; Securities 35–37 examples of, bands, 118–119 bands, L David Landry, 232 George, Lane, 375 trades, Late 487 478, of Large Numbers, Law See also Noise 474–478. of one price, Law 585 470–471, Edwin, Lèfevre, 493 Henri, Lefèvre, Legislation Rate See London Interbank Offered Libor. 88 87, trailing stop, ATR Limited 7 regression, Linear least-squares (LWMA), average moving weighted Linearly 63 Linear regression, Line charts, 34–37 53 Line formation, 33–34 contracts, Linked 149 Lip, 577 266, Jesse, Livermore, See London Metals Exchange LME. 12 Andrew, Lo, 578 Gerald M., Loeb, 43 Logarithmic scale, J 588 579–582, 470, Tudor, Paul Jones, 532 , Management of Portfolio Journal K average moving See Kaufman adaptive KAMA. 191 Kasakasa pattern, (KAMA), average moving Kaufman adaptive Chester Keltner, 471 Maynard, John Keynes, 172 bar, reversal Key 616 Jr., Benjamin F., King, 179–180 pattern, Knockout (KO) KO. See Knockout pattern 550–552 Kurtosis, wave See Kondratieff K-wave. Index, 387 Index, 387 (value-weighted), 580–584 141–142 Baltic Dry Index (BDI), 386 DryBaltic (BDI), Index Bond Aggregate U.S. Barclays Bloomberg capitalization-weighted 385 index, researchcommodities bureau 387 construction and weighting, 387 (unweighted), equal-weighted 387 modified capitalization-weighted, 387 indexes, price-weighted 388 sponsors of indexes, survivorship 388–389 bias, 385 Dollar Index, U.S. 605 economic, 601 external, 605–606 internal, 603–605 monetary, 612–613 putting them together, 602–603 sentiment and valuation, 578–580 and, mistakes 573–574 and, money 615–630 selection of, 574–575 techniques, case studies of successful, 312 of, expectations 305 and, commitment market 587 Research on, 309 51, psychology of, 463 risk-averse, 268 risk preference, 310 and, ratio risk-reward 570–597 successful, 571 types of, Indexes, 382–390 Indexes, Indexes Indicators 174–177 Inside bar pattern, 69–70 Internal lines, trend 184–186 patterns, Intraday 66–68 price action, Intraday 208–209 trading, Intraday 560–561 rules, Inverse 192 191, hammer pattern, Inverted 143 triangle, Inverted Investments Investors offerings See Initial public IPOs. 476 171, pattern, pattern, “Isosceles triangle”

637

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Martingale hypothesis,Martingale 456–458 Martin, Trayvon,586 Markowitz, Harry, 461 Market-timing model, 600–601 Markets, strength of, measuring 314–345 Markets Market breadth, 316–335 MAMA. SeeMESAadaptive moving average MAMA-FAMA system, 112 Malkiel, G., Burton 495 Mackay, Charles, 584 MACD. SeeMoving Average Convergence/ MA. SeeMoving averages M Lynch, Peter, 571, 578, 579, 591 LWMA. SeeLinearly weighted moving average Lucado, Max, 591 Look-ahead bias, 567–568, 569n13 patterns, 155–156 barchart Long-term Long position, 568n1 London InterbankOffered Rate (Libor), 386 description of,description 457 indicators, 343–344 very short-term using moving averages, 340–342 up anddown volume indicators, 331–335 overview, 314–316 net ticks, 343–344 net new highsandnetnew lows, 336–340 market breadth, 316–335 objective statements,learning 314 breadth andnew highstonew lows, 343 ranks, 620, 624–626 oversold, 323 overbought, 323 EMH modeland, 461–468 capitalization, 383 traditional advance-decline methodsthat no thrust, 329–410 ratios, 328–329 overview, 316–317 summary,indicators 410–331 double negative divergence, 319–322 differences, 324–328 breadth line/advance-decline line, 317–319 advance-decline linetoits32-week simple longer are profitable, 322 moving average, 322–324 Divergence Models Model-building process, 600–614 Mode, 535–536 Mistakes, 578 Mikkea, Jim, 338 MFI. SeeMoney flow index MESA adaptive moving average (MAMA), 109 MESA. Merrill, Arthur,322 Melamed, Leo, 577 Megaphone, 143 Median, 535 gaps,Measuring 166 Measured rule, 134 Mean reversion, 471–472 Mean, 534–535 McClellan summation index, 325–327 McClellan ratio-adjusted oscillator, 325 McClellan Oscillator, 324–325 McClellan Index, 107 McClellan, Sherman, 324 McClellan, Marian, 324 Maturity, 401 timing models, 573–574, 587–592, 595–597 Shiller model, 479–481 overoptimization of, 612 model,option pricing 430 Markowitz model, 468 market-timing model, 600–601 market model, 468 indicator models, 596–597 herd instinctmodels, 478, 479–482 EMH model, 461–468 curve-fitting, 612 composite model, 612–613 model,capital assetpricing 463–468 bubble models, 479n6 model, 481–482 Abreu-Brunnermeier sentiment andvaluation indicators, 602–603 together,putting indicators 612–613 moving averages, 606–607 indicators,monetary 603–605 , 610–611 model inputs, 601 objective statements,learning 600 indicators,internal 605–606 economic indicators, 605 crossings andslopes, 607–610 investments and, 578–580 See Maximum Entropy Spectral Analysis No vember 8, 2019 2:42PM index 639 vember 8, 2019 2:42 PM 8, vember No Investment Fiduciaries Investment 341 338, 336–337, 334, 333, 362 Kaufman), 317 205, 333–334 characteristics of successful investors, 587 characteristics of successful investors, 597–579 nine rules of, 603–604 principles of, 479 white, 478 agenda of, 468 definition of, 481 Friedman-Black for, path 477–478 Friedman and, view 475–477 fungibility and, 474–478 of one price, law 473 474, learning statements, objective origin 479–481 of, 473–474 474, overview, as technical 473–482 traders, 475–476 trend-following, Natural cycles, 357 cycles, Natural of Real Estate Council See National NCREIF. Research See Ned Davis NDR. 593–594 Poll, Sentiment NDR Crowd Index See NASDAQ-100 NDX. 152 Neckline, 328, 327, 323, Research (NDR), Ned Davis 203 divergence, Negative 202 201, swing, failure Negative 217 (NMF), flow money Negative 316 203, reversal, Negative 16 C., A. Nelson, 343–344 Net ticks, 407 (NAV), Net asset value 11 Neurofinance, 569n3 Neutral, Systems and Methods (Perry Trading New Stock Exchange (NYSE), York New 501–502 Victor, Niederhoffer, 334–335 days, volume 9-to-1 down (NPDD), days Ninety percent downside flow money Negative See NMF. Noise 474–481 Noise traders, 351 Nominality, 22 Nonconfirmation, Normal 549 distribution, days See Ninety percent downside NPDD. 496 Null hypothesis, Stock Exchange York See New NYSE. NASDAQ-100 Volatility Volatility Index NASDAQ-100 393 Fiduciaries (NCREIF), (MACD), 227–228, 300 227–228, (MACD), 619 606–607, description of, 224–225 descriptionof, 471–472 strategy, 225–226 success of, 575–578 characteristics for making, 575–576 making, discipline for 587 of, management 575 indicators, objective 577–578 risk management, 570–597 successful investors, 285–287 diagonal, 284–285 extension, 283–284 impulse, 285 truncation, 98 description of, 113–116 and, movement directional 116–122 and bands, channels, envelopes, 112 giving signals for, 97 learning statements, objective 102 length of, 341–342 30-week, number above 97–98 overview, 110–111 price determination, extremes 109–112 strategies for using, support 110 determination, resistance and 104–112 types of, 102–103 using, 102–104 using multiple, N 177 reversal, bar upward Naked 183–184 bar, Narrow-range See Cboe Index (NDX). NASDAQ-100 Investment Council of Real Estate National Momentum, 315, 604, 610–611 604, 315, Momentum, See also Currencies Money. 216–217 oscillator), index (MFI; flow Money 89–90 stops, Money Morning 194–195 star pattern, 282–287 281, waves, Motive Average Convergence/Divergence Moving 557–558 rule, Moving-average-cross 340–342, 97–123, (MA), averages Moving 363–364 Method, Average Moving See Medium-term notes MTNs. 525–527 Mutual Fund Cash/Assets Ratio,

639

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Overbought/oversold, 202 Outside reversal day, 59 Outside days, 269 Outside bar, 177–178 Out-of-the-money, 418 Osler, Carol, 476 Oscillators, 210–219, 558 Orkin, Michael, 578 ORB. SeeOpeningrangebreakout Options contracts, 417 Options Open interest, 221–224 Opening rangebreakout (ORB), 184–185 Opening , 164–166 Oops! buy pattern, 180 One- andtwo-bar reversal patterns, 172–178 On-balance-volume (OBV), 210–211 On BalanceOpenInterest Indicator, 223–224 Offers. SeeAsks OBV. SeeOn-balance-volume Objective rules, evaluation of, 555–567 Objective indicators, 575 Obama, (President), Barack 571, 596 SeeOption-adjustedspreads OAS. O similarities between,similarities 236 example of, 201 of,description 201–202, 323 impact from optionprices, 434–435 indicators, 222–224 of,description 221–222 using logsofdailyratio insteadof price in,use ofbenchmarks 561–567 traditional rules, 560–561 TA rules, 556–560 versus subjectiveanalysis, technical 555–556 overview, 555 market’s nettrend, 562–563 look-ahead biasandtradingcosts, 567–568 positionbias,long/short 562–564 objective statements,learning 555 inverse rules, 560–561 detrending market data, 565–566 conjoint effectofpositionbiasandmarket trend from multiple thresholds, rules binary andthresholds, rules binary 557–558 percentages, 566–567 performance,on back-test 562–565 558–560 Point-and-figurecharting, 252–277 POI. andOpenInterest Index SeePrice Plurality index, 327 Plummer, Tony,220 Pivot pointtechnique, 80–82 Pivot Pipe formation, 172–173 Piercing linepattern, 193–194 Perpetual contract, 33 Period ofinterest, 9 Performance Percentage retracement, 95 Percentage ofgain, 88 Percentage method, 57, 362 Percentage envelopes, 116–118 Pennants, 153–154 ratioP/E. SeePrice/earnings Patterns, patterns; 132. Cycles SeealsoBarchart Par value, 394 Parabolic SAR Paper umbrella pattern, 191 Painter,223 William, P description of,description 252–254 daily rules, 255 buy signals, 257 box size, 259–263 applications of, 277 reversal of, 163 of rules, 501 investment, 622, 624, 625, 627, 628 in-sample, 499 back-test, 562–565 trading, 155 with rounded edges, 149–156 quantification of, 497–498 of predictability, 460 irregular, 265–266 intraday, 184–186 gaps and, 167–169 of,frequency 159 existence of, 128–130 andexit,entry 126–127 description, 126–128 classic, 204 of,characteristics 126–128 causes of, 128–129 of,categories 133 using, 88, 89 No vember 8, 2019 2:42PM index 641 vember 8, 2019 2:42 PM 8, vember No 456–458, 496 456–458, 254–255 352 348, Hurst), 129–130 normal, 549 normal, 545–546 properties of, plotting using the point-and-figure method, method, point-and-figure using the plotting 618–619 ratios, patterns 476–477 in stockreversal prices, 302 targets, 130 tick-to-tick, 134 price to set priceusing breakout targets, 211–212 and, trend volume 224–226 momentum, 48–49 and, trends 502–503 469–473, finance, behavioral 309 51, of investor, 242–243 negative, finance, pattern and behavioral recognition 311–313 310, of trading, 127–128 description of, 146 in diamond patterns, 264 with limited risk, 265 after, trend new 304 trading and, wave Q 206 S., Edward Quinn, R 16, Hypothesis (RWH), Walk Random Price and Open Interest Index (POI), 223 Price (POI), Index and Open Interest Price 224–239 confirmation, 602 Price/earningsratio, (P/E) 423 Pricing models, 352 Principle of proportionality, 548–549 distribution, Probability Timing (J.M. Transaction Stock of Profit Magic Profits Programmability criterion, 556 205 “Program trading,” 86 stops, Progressive 351 Proportionality, 85–86 84, stops, Protective Psychology 95 94, Pullbacks, 418 Put option, 426–428 Put prices, 276, 277 276, 274–275 277 276, formations, 256 formations, 259 history of, 270–272 horizontal count, 252 learning statements, objective original, 253 painless charts, 255 267 of stops, placement 254–255 plotting prices, 269–273 price objectives, 269 reversals, 258–259 studies about, 267–268 success of, 254–255 reversal, 3-box 269 trading and, 266–267 trading risk, 263–269 trading techniques, 269 of reversals, treatment 256–257 trendlines, true relationship, price-volatility 274–277 sizes, box with variable 272–273 vertical count, 69 “bounce,” of, percentage based on a fixed boxes 630 changes in, 161 closing, 29 cyclicality of, 617n4 data, 17 11, discounts and, 428–429 movement, estimating example of chartered, 31 finding truerelationship, price-volatility 434–435 option prices, impact from 474–478 of one price, law 110–111 and, averages moving 12 nonrandom, 269–273 objectives, 433 opening, Point-and-figure patterns, 132, 208 132, patterns, Point-and-figure 78 filter, Point/percent See Government Politics. 238–239 Popsteckle, 203 divergence, Positive 202 swing, failure Positive 316 203, reversal, Positive 291 thrust, Post-triangle 317 Preferred shares, Price

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Reversal point Reversal patterns Reversal bar, 172, 316 Returns Retracements, 92–96 Resistance zone, 54 Resistance point, 53–54 Index(RSI), 229–232 Relative strength (RS). SeealsoTechnical REITs. SeeRealestate investment trusts line,Regression 63–64 Rectangle pattern, 135–137 Rectangle formation, 53. SeealsoTrends Real estate investment (REITs), trusts Real body, 40, 245–246 (ROC),Rate ofchange 228–229 Raspberry,586 William, Raschke, LindaBradford, 183–184, 239 Range trading, 61–62 construction of support andresistance zones, ofsupport construction prices,in stock 476–477 treatment in point-and-figure top, 250 3-box, 254–255 positive, 316 negative, 316 distribution, return 462 normal waiting for, 95 andthrowbacks,pullbacks 94 overview, 75, 93–94 objective statements,learning 75 Fibonacci ratio and, 293–294 ranks, 619 overview, 615–617 market ranks, 624–626 limitations, 629–630 objective statements,learning 615 results of,empirical 621–623 price volatility,effect ofstock 623–624 divergence ranks, 626–629 forinvestmentas criterion selection, ofthedata file,construction 617–621 trading, 137 busted, 137 as indicator, 316 59–61 charting, 269 615–630 analysis 317, 386 RWH. SeeRandom Walk Hypothesis Run bars, 177 Runaway gaps, 166 Ruin, 5 RSI. SeeRelative Strength Index SeeRelative strength RS. Round numbers, 56 Rounding pattern, 149–151 Rogers, Jim, 574, 577 SeeRate ofchange ROC. Risk-reward ratio ratio Risk/return Rising wedge, 147 Rising moving average, 102 Rhea, Robert, 11, 16 Reverse triangle, 143 Reversals, 203 Setup, 159 Settlement price, 401 scale,Semi-logarithmic 42–44 Commission andExchange Securities Securities Acts (1933; 1934), 472 SEC. Commission andExchange SeeSecurities Seasonality, 358 359 Seasonality charts, Seasonal index, 362–364 Marty,Schwartz, 574, 577 Schwager, Jack, 576–577 Scallops, 149–151 Scale, 42–44 “Saucer” pattern, 149–151 SAR. SeeStopandreverse Samuelson, Paul A., 493 S definition of, 310 limited risk, 264 investor preference, 268 control of, 268 for breakout trading, 95–96 signals, 244 rules, 557 percentage method, 57 high volume method, 58–59 Gann two-day swing method, 57–58 of,determination 56–61 DeMark versus Williams method, 57 trend linesand, 65 (SEC), 514

No vember 8, 2019 2:42PM index 643 vember 8, 2019 2:42 PM 8, vember No Stoller Average Range Channel band Channel Range Average See Stoller 341–342 119 band, and PrincipalInterest Securities breadth of, 316 of, breadth 316 decline in, 623–624 effect of stock pricevolatility, 336 lows, highs and net new net new 336–337 lows, highs versus new new average, moving 30-week number above patterns in stock 476–477 reversal prices, 477–478 issues, systematic 89 88, parabolic, 121 signals, 90 and, breakouts 84–85 changing, 83–84 entry exits, and 91 90, gaps and, 75 learning statements, objective 83 75, overview, 85–86 protective, 86–89 trailing, 11 description of, 431–434 fluctuations, 8–9 from, development trend 55 54, examples of, 110 and, average moving 55–56 occurrence, resistance 59–60 zones, STARC. 238–239 David, Steckler, 232–235 , 276–277 Stock dividends, election cycle See also Presidential . Range Channel (STARC) Average Stoller (SAR) Stop and reverse 86–87 Stop line, 266 Stop loss, See Stops Stop orders. 83–92 Stops (stop orders), 185 Stretch, 418 Strike price, of Registered Trading See Separate STRIPS. 582 Dan, Sullivan, 350 Summation, and demand Supply 53–56 , 54 Support point, 166 Suspension gaps, 584 Jonathan, Swift, 158–199 161–162 candlestick 187–198 patterns, 169–171 bounce, dead cat 172–173 of, failure 171 island reversal, 158 learning statements, objective 194–197 patterns, multiple-bar 172–178 patterns, reversal one- and two-bar 158–161 overview, pattern construction and determination, 169 spikes, 162–178 traditional, 160–161 of, variables 182–184 patterns, volatility Shadows, 40 Shadows, 181 pattern, Shark-32 181–182 Shark pattern, Alan, 571 Shaw, 479–481 Shiller model, 220 Shockspiral, 192 191, pattern, Shooting star 568n2 Short position, Short 303 sellers, Short-term 472 momentum, Short-term 153–155, patterns, trading 5–6 trend, Sideways 102 101, 100, (SMA), average Simple moving 586 J., O. Simpson, vehicles See Special investment SIVs. 550–552 Skewness, 129 F., B. Skinner, 208 Slippage, 607–610 Slopes, average Simple moving See SMA. 578 577, 571, George, Soros, See Standard & Poor’s S&P. 91–92 Specialist breakout, 353–354 Spectrograms, 71–72 Speed lines, 419 Speculation, 540–543 , 418 Strike price, 169 Spikes, 190 Spinning top, 276–277 Splits, 582–584 322, John, Stack, 79 Standard deviation, 465 397, (S&P), Standard & Poor’s Standard triangle 138–139 pattern,

643

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Ticker Thrust, 326, 329 Throwbacks, 93, 94 Threshold, 557, 559 pattern,Three whitesoldiers 195–196 Three outsideuppattern, 197 Three outsidedown pattern, 197 Three insideuppattern, 196–197 Three insidedown pattern, 196–197 Three crows black pattern, 195–196 Thomas, Judge), Clarence (Supreme Court 585 Thiel, CharlesC., Jr., 258 10-day moving average, 500 10-1 volume days, 334–335 Templeton, SirJohn, 574, 591 Technical traders, asnoisetraders, 473–482 (TA), 3–14. SeealsoRelative Taylor, Owen, 253 TA T “Synodic,” 358 Synchronicity, 350 pattern, triangle 141–142 Symmetrical invention of, 29–30 of,description 127–128 , 475–476 overview, 473–474 objective statements,learning 473 trend description, 9–10 trend, 5–6 traditional, 560 theoretical underpinnings, 493–494 andresistance,support 53 for, description rule 556–557 overview, 3–4, 492–493 objective versussubjective, 555–556 making money, 4–5 objective statements,learning 3, 327 of,importance 317–318 identification oftrends, 7–8 of,history 493–494 evaluation,empirical 494–501 development oftrends from supply and assumptions for, 11–13 adaptive markets and, 501–504 to,academic approaches 492–505 Technical analysis. SeeTechnical principle of,principle 351 demand, 8–9 strength; Statistics Trading ranges, 49 Trading. SeealsoWavetrading Traders Trade TRACE. See Trade andCompliance Reporting Top orbottomreversal bar, 172 TMA. See Triangular moving average TIPS. Timing models, 573–574, 587–592 Time stops, 89 Time prices, 130 Tick-to-tick tape,Ticker 29–30 analysts useof, 61–62 , 149 volume, 79 volatility of, 79 using point-and-figure techniques, 263–269 triangles, 142–143 testing rules, 565 strategies, 472–472 size of, 311 selection of, 269 rules, 123 usingpoint-and-figure techniques,risk risk/reward, 244 rectangle patterns, 137 range trading, 61–62 of,psychology 310, 311–313 performance, 262 opening range, 184–185, 247 methodology, 311 look-ahead biasandcostsof, 567–568 intraday, 208–209 patterns,head-and-shoulders 153 flags andpennants, 155 errors, 33 double formations, 135 diamond formation, 146 costs of, 568 breakout trading, 62 noise traders, 474–481, 473–482, 504– folklore of Wall Street traders, 470–472 building, 595–597 stops, 89 breakouts and, 78–79 of,description 30 Treasury Inflation-Protected See Treasury 266–267 Engine Securities No vember 8, 2019 2:42PM index 645 vember 8, 2019 2:42 PM 8, vember No 248–249 options for valuing, 429–431 options for valuing, market strategies, 247–248 strategies, market 301–302 maturity of, 606 near-term, 47–48 overview, 52–53 of, peaks and troughs 211–212 trend, price volume and 48–49 and, profits 56–61, determination, point reversal 56 numbers, round 53–56 support of, and resistance 49 terminology for, 53–62 trading range determination, 140–141 ascending, 139–140 descending, 143 inverted, 143 reverse, 138–139 standard, 141–142 symmetrical, 142–143 trading, 308–309 trading and, wave 275–276 of average, based on a multiple boxes V Value 578 Mutual Fund Group, Vanguard 108–109 EMAs, Variable 540–543 Variance, 352–353 Variation, U 328 Unchanged issues index, Unchanged 316 stock, 5–6 Uptrend, 385 Dollar Index, U.S. 396 prices, Treasury U.S. Triangle patterns Triangle 108 (TMA), average moving Triangular top and triple 137–138 bottom pattern, Triple 233 214, 81, 80, range, True 596 (President), Harry S. Truman, 285 Truncation, 470 Management, Tudor 215 Colin, Twiggs, 215 Flow, Money Twiggs 173 pattern, breakout Two-bar 172–173 pattern, reversal Two-bar projection, 475 projection, 109–110 neutral area, 49 area, neutral 135–136 pattern, 86 overview, 86–88 line, using a trend 89 88, SAR, using parabolic 88 of gain, using percentage 236–238 determining, stock pricepredictable based on trend 65–66 accelerated, 73 72, pitchfork, Andrews’ 66 decelerated, 68 67, 66, 65, examples of, 72–74 lines, Gann fan 66–68 general rules for, 69–70 internal, on point and figure 70–71 charts, 65 scale and, 71–72 speed lines, 86–88 trailing stops and, 64–65 using, 61–62 use of trading ranges, analysts’ 11–13 assumptions for, back-test 562–565 performance and, 47–74 basics of, 68–69 channels, 50 of, versus reversal continuation 179 correction within, 19 definition of, 9–10 6, description of, averages, determination for using moving 51–53 determination of, 566 558, detrended, 8–9 and demand, supply from development 62–70 directional, 51–52 versus linear, directional 18–25 theory, of Dow 49–50 9–10, fractal nature, 203–204 ID, 301 7–8, of, identification 50 influence of other trends, 51 psychology and, investor 47 learning statements, objective Traditional rules, 560–561 rules, Traditional 86–89 84, stops, Trailing 51 Trending, 44 7–8, lines, Trend 206 service, Trendograph theory See also Dow 5–6. Trends,

645

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VPCI. See Volume indicator confirmation price Volume statistics, 208–210 Volume spikes, 219–220 Volume-related oscillators, 214 Volume-related indexes, 210 Volume indicator (VPCI), confirmation price Volume oscillator, 214, 215 Volume indicators, upand down, 331–335 Volume dips, 221 Volume confirmation, 205–221 Volume, 401 Volatility VIX, 514 Vertical count, 272–273 volume spike andclimax, 220 examples of, 220–221 on breakout, 219–220 with,volume thrust 333 10-to-1 volume days, 334–335 ninety percentdownside days, 333–334 9-to-1 down volume days, 334–335 Index,Arms 331–332 volume statistics, 208–210 volume spikes, 219–220 point andfigure, 208 indexes andoscillators, 210–219 equivolume, 206–208 description, 205 bar/candle portrayal, 205–206 of trading, 79 rate ofchange, 219 and,patterns 136 of,importance 23–25 of,description 222 breakouts and, 79 VIX and, 435 valuing options, 429–431 single-day calculation, 433 ranks, 619–620 put-call parity, 426–428 overview, 424 objective statements,learning 424 implied, 424–435 impact onoptionprices, 434–435 versusforward-looking volatility,historical fluctuations basedonsupply anddemand, movement,estimating price 428–429 220–221 424–426 431–434 Whipsaw, 84 Wedge pattern, 146–149 Wave trading, 299–313. SeealsoTrading Wave principle, 281–298. Seealso Wave length, 348 Wavelet diagrams, 354 Warrants, 423 Wall Street Journal, 383 Wall Street Accumulation SeeWilliams WAD. W trading, 149 of,characteristics 148 zigzag, 288, 307, 308 Wave and, principle triangles, 308–309 studies traditional technical trade size, 311 managementand,risk 310–311 targetsand,price 302–303 points ofinvalidation, 303 patience and, 312–313 overview, 299–300 methodology, 311–312 ofthetrend,maturity 301–302 objective statements,learning 299 invalidation of, 303 impulse waves, 305–306 improvement with, 300–303 identification of, 301 flat trend, 308 expectations, 312 ending diagonal, 306–307 Elliott wave tradesetups, 304 Elliott guidelines, 305–309 discipline and, 312 identification,countertrend 301 corrective waves, 304–305 best waves, 303–304 overview, 281–282 motive waves, 282–287 objective statements,learning 281 Fibonacci relationships, 292–297 corrective waves, 287–292 folklore oftraders, 470–472 300–303 about, 300 Elliott, R. N. Distribution

No vember 8, 2019 2:42PM index 647 vember 8, 2019 2:42 PM 8, vember No 589, 591 589, Y 570 Janet, Yellen, 398–399 curve, Yield 394–395 Yield-to-maturity, Z 308 307, 288, Zigzag pattern, 586 George, Zimmerman, 588, 580, 576, 578, 330, Martin, Zweig, 213–214 212 (WVAD), Distribution method, 108 method, 180 Oops! pattern, Wick, 40 Wick, 182–183 bar, Wide-range 229 113, Welles, J. Wilder, 222 212, 209–210, 57, Larry, Williams, Distribution (WAD), Accumulation Williams 235 %R, Williams Accumulation Variable Williams Distribution 189 Windows, Accumulation Variable See Williams WVAD. 266 Richard, Wyckoff,

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