INDEX Page numbers followed by n indicate note numbers. A Array, investing and, 456 Ascending triangle, 192, 193–194 Absolute return, 537 Aspray, Thomas, 160 Acampora, Ralph, 151 Aspray’s demand oscillator, 160–161 Accumulation and distribution, 159 Asset allocation, 448, 540 Accumulative average, 62 Athens General Index, 470–471 ACD method, 239 ATR. See Average true range Active portfolio weights, 539 Autoregressive integrated moving average Activity-based intervals, 17–18 (ARIMA), 429–435 tick bars, 17–18 forecast results, 433 volume-scaled charts, 17 Kalman filters, 434–435 Adaptive markets hypothesis (AMH), 546, 553–554 mean-reverting indicator, 581 Adaptive Trading Model, 527 slope, 434 A/D oscillator, 132–136 trading strategies, 433–434 Advance-decline system, 174–175, 706 use of highs and lows, 434 Advance Market Technologies (AMTEC), Autoregressive model, 50–51 726–727n2 Average-modified method, 57 760 Advances in financial machine learning, 575 Average-off method, 57 ADX line, 39–40 Average true range (ATR), 32 Alexander filter, 624 Average volume, 153 Allais Paradox, 351 Alpha description of, 537 B method, 461–462 Backtesting, statistics of, 569–580 returns, 537 price data, 573–575 American Association of Individual Investors statistical concerns in, 576–580 (AAII), 380 time-series price data, 572–573 Amex QQQ volatility index, 348 Bacon, Francis, 599–600 AMH. See Adaptive markets hypothesis Bailout, 212 AMTEC. See Advance Market Technologies Bands, 42–45, 75–84 Anchoring, 362–363 confidence, 435–437 Animal spirits, 561 formed by highs and lows, 75 Annualized rate ofCOPYRIGHTED return, 754 rulesMATERIAL for using, 81–82 Apex, 192, 234 trading strategies using, 44–45 Appel, Gerry, 169 Bandwidth indicator, 45 APT, 680n22 Barberis, Shleifer, and Vishny (BSV) hypothesis, Arbitrage, 647–649, 655 668–670 Arguments, 588–592 Bar chart, 185, 208–209 ARIMA. See Autoregressive integrated moving Bar chart patterns, 178–210. See also Patterns average classic patterns, 187–202 Aristotle, 582–583, 588 learning objective statements, 178 Arithmetic moving average, 24 overview, 178–179 Arms index, 167–168 Base, 192 Arms index (TRIN), 167–168 Bat indicator, 499 bindex.indd 760 1/20/21 9:26 PM Bayes’ theorem, 679n9 interpreting, 173–175 Bearish belt-hold, 262 learning objective statements, 152 Behavioral finance, 552–553, 654–673, 683n84 market breadth indicators, 705 anchoring and adjustment to, 657–658 Breadth thrust, 500–502 bias and, 656–657 Breakaway gap, 216–217 competing hypotheses of, 667–673 Breakout diffusion of information among investors, false and premature, 188 662–663 gaps, 216–217 foundations of, 655–656 systems, 739 herd behavior, 661–662 Breakout price, 187 imitative behavior and, 661 Broadening patterns, 192, 196–199 information cascades, 661–662 Broad Market Equity Series All-Cap Index, investor attention shifts, 663 499, 500 investors’ stories, 658–659 Brokerage firms, 378 limits of arbitrage, 655 BSV. See Barberis, Shleifer, and Vishny hypothesis limits of human rationality, 655–656 B T. See Bolton-Tremblay value optimism, 659 Bubbles, 553, 558, 561 overconfidence and, 552 Buffett, Warren, 661 pattern recognition and, 182–183 Bulkowski, Thomas N., 179 psychological factors of, 656–660 Bullish belt-hold, 261, 262 role of feedback in systematic price Bullish divergence, 722 movements, 664–666 Bullish engulfing pattern, 266–268 sample size neglect, 659–660 Bullish nonconfirmation, 722 social factors of, 660–666 Bullish piercing pattern, 265–268 761 Bernard, V., 680n19 Busted rectangles, 190 INDEX Beta “Butterfly effect,” 470 description of, 537–538 Buy returns, 537–538 relative strength and, 354 Blau, William, 139, 161 signals, 68–74 Bogle, John, 544, 554–555 Buy-and-hold return, 748 Bold conjecture, 609. See also Popper, Karl Bollinger Bands, 42–43, 78–84 combined with other indicators, 84 C modified, 79–80 CADR. See Cumulative advance-decline ratio Bolton-Tremblay (BT) value, 166 CADV. See Cumulative accumulation- Bonds distribution volume AAA, 530, 730–731n39 Calculation period, 55 learning objective statements, 529 VIX and, 338–341 long-term interest rates, 453–454 Candlestick chart, 4–6, 8, 17–18 model, 529–535 Candlestick charts to stocks, 454 applications, 280–287 Bottom reversal bar, 225 to confirm resistance, 281–282 Bottom-up analysis, 459–463, 563 to confirm support, 282 Bowl, 202–203 confluence of candles, 283–284 Box pattern, 188–189 to enter or exit trades, 284 Box size, 12–13 to preserve capital, 280–281 Breadth Candlestick patterns, 240–246. See also Multi- as a countertrend indicator, 175 candle patterns; Single candle lines highs and lows, 170 description of, 240–241 indicators, 164–171 ranking, 251 bindex.indd 761 1/20/21 9:26 PM CANSLIM method, 463–464 level II exam, ix Capital asset pricing model (CAPM), 642, program, viii 680n21 CN. See Channel-normalization operator Capitalization, EMH and, 651 CNV. See Cumulative negative volume index CAPM. See Capital asset pricing model CNVR. See Cumulative net volume ratio Case studies Coefficient of determination, 411 of designing “HAL” (2001: A Space Odyssey), Cognitive consonance, 552 745–749, 757–758 Cognitive dissonance, 552–553 of gaps and classic patterns, 220–222 Cognitive errors, 655 rule data mining for the S&P 500, 685–731 Coil, 194–195 Catalysts, 546 Commitments of Traders (COT) report, CBO. See Channel-breakout operator 385, 386 Cboe DJIA volatility index, 343–345 Commodity Channel Index (CCI), 745 Cboe NASDAQ-100 volatility index, 345–346 Commodity Futures Trading Commission Cboe Russell 2000 volatility index, 346–347 (CFTC), 386, 676 Cboe S&P volatility index, 347 Commodity Research Bureau (CRB), 473 CBOT. See Chicago Board of Trade Commodity Trading Advisors (CTAs), 64 CCI. See Commodity Channel Index; Computers Continuous Commodity Index pattern recognition and, 183–184 CFTC. See Commodity Futures Trading testing of trend system, 98 Commission Confirmation CHADTP. See Connors-Hayward Advance- earnings with technical confirmation, 652 Decline Trading Patterns errors, 552 762 Chaiken, Mark, 158, 701, 702 Connors, Larry, 233, 237 Chande, Tushar, 168–169 Connors-Hayward Advance-Decline Trading Channel-breakout operator (CBO), 691–692, Patterns (CHADTP), 174–175 INDEX 729n12 Constant forward contracts, 743–744 Channel-normalization operator (CN), Continuous Commodity Index (CCI), 518 695–697. See also Stochastic indicator Cooper, Michael, 678–679 Channels, 45–46, 75–84 Correction, within a trend, 232 description of, 200 Correlation, 409–422 Keltner, 75–76 assumptions, 412–420 Charles D. Kirkpatrick method, 464–465 coefficient, 409–412, 430 Charting, 12–20 homoscedasticity, 421–422 activity-based intervals, 17–18 learning objective statements, 409 learning objective statements, 12 normality, 417–420 market profile, 19–20 outliers, 421 of multiple data sets, 9–11 Correlogram, 431–432 overview, 12 Counterattack patterns, 268 price-based intervals, 12–16 Countertrend trading, 124, 175 Chicago Board of Trade (CBOT), 19, 20 CPB. See Cumulative positive volume index CHLR. See Cumulative new high-lows ratio Crabel, Toby, 227, 229–230, 237–238 Climax pattern, 199–201, 222, 223 Cradle, 192 Cluster, 213 CRB. See Commodity Research Bureau CMA Envelope, 302 Crime of small numbers, 659–660 CMF. See Cumulative money flow Crossovers, left and right, 131 CMT Association CTAs. See Commodity Trading Advisors about, vii Cumulative accumulation-distribution volume exam topics and question weightings, ix (CADV), 701–703 level II content selections, ix Cumulative advance-decline ratio (CADR), 706 bindex.indd 762 1/20/21 9:26 PM Cumulative money flow (CMF), 703 Death cross, 92–94 Cumulative negative volume index (CNV), Demand Index, 165–166 703–704 Demand oscillator, 160–161 Cumulative net volume ratio (CNVR), 706 Derivatives, 184, 383 Cumulative new high-lows ratio (CHLR), 707 Derivatives markets, 383–389 Cumulative on-balance volume, 700–701 Descartes, Rene, 600 Cumulative positive volume index (CPB), Descending triangle, 192–193 704–705 DHS. See Daniel, Hirshleifer, and Cups, 202–203 Subrahmanyam hypothesis Currency rates, 452–453 Diamond top pattern, 192, 197–199 foreign, 476 pullbacks in, 199 risk, 674 trading, 199 Curve-fitting, 742, 749 Directional movement Cycle analysis applied, 299–312 constructing indicators for, 37 application of principles and tools, 299–300 description, 37–40 learning outcome statements, 299 using, 38–40 spectrogram, 307 Distribution, frequency of, 67–68 visual analysis, 306 Divergence index, 120–121 Cycle theory, 288–298 Divergence rules, 719–728 inversions, 290 limitations of proposed indicator, 723–725 principles, 288 need for double channel normalization, variation, 294 725–727 Cyclicality, 288–289 objective measure of, 722–723 Cyclical stocks, 537–538 parameter combinations and naming 763 convention for, 727–728 INDEX subjective analysis, 721–722 D types, 726–728 Daily raw figure (DRF), 133 Divisor, changing, 142–143 Daily Sentiment Composite, 506, 512 DJIA. See Dow Jones Industrial Average Daily XLV Dominant Cycles, 310 Doji pattern, 242, 257–260, 281–282 Danger points, 466 Doji star, 247 Daniel, Hirshleifer, and Subrahmanyam (DHS) Dollar, 452–453, 455 hypothesis, 670–671 Donchian channel, 46, 739. See also Moving Dark cloud cover, 245–246, 247, 265, 266 averages Data 5- and 20-day moving average system, 90–92 charting multiple sets of, 9–11 20- and 40-day breakout, 92 in-sample, 750 Dorn, Anne, 557 special data problems for futures systems, Dorn, Daniel, 557 743–744 Double bottoms, 187–188 testing with clean data, 742–743 Double-smoothed momentum, 139–146 Data intervals, 3–11 Double-smoothed stochastic, 141 charting multiple data sets, 9–11 Double tops, 187–188 description of, 3–7 Dow, Charles, 147 learning objective statements, 3 Dow Jones 20 Bond Average, 530 overview, 3 Dow Jones Industrial Average (DJIA) working with multiple, 7–9 industry weightings, 345 Data mining. See Rule data mining for the members of, 344 S&P 500 Dow Jones Industrials, 457–458 Days to Cover, 379 Downs, Walter, 234–235 Dead cat bounce (DCB), 222–224 Downtrends, 147 bindex.indd 763 1/20/21 9:26 PM Dragonfly doji, 259 Equity curve, 755–756 Drawdown, 744, 754 Equity market, 684n99 DRF.