Ten lessons from my book “The Ultimate Guide to Chart Patterns”
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Trendlines are the identifiers and connectors of resistance and support price levels on chart patterns.
Trendlines are used to measure and quantify the path of least resistance for a chart in your time frame.
Trendlines are identifiers of the trend in your trading time frame.
You increase your odds of success in vertical price channels by buying in the direction of the channel’s trend.
When trendlines connect higher highs and higher lows, you increase your odds of success by buying the dip in price to the lower trendline.
A bull flag is a powerful bullish chart pattern that is found during strong bull markets. These patterns are often formed in leading growth stocks that have gone parabolic.
A pennant pattern is very similar to a flag pattern, except a flag is rectangular and descending and the pennant is triangular.
A bull pennant chart pattern occurs after an uptrend that follows a previous price base earlier in the chart.
Cup and handle patterns are not good probability trades if the general market is in a correction or a bear market.
The pattern has better odds if the stock is in a strong sector that has increasing earnings
Look for a ‘U’ shape and volume that dries up near the cup’s low. Volume that dries up at the bottom suggests funds lost interest in selling. U-shaped bases are more likely to work than V-shaped.
Volume will often contract as a chart pattern approaches a breakout. A breakout with higher than average volume can give a buy signal a higher rate of success.
Increase your odds by selling rallies into upper trendlines when they connect lower highs and lower lows.
You improve your odds of success in horizontal price channels by buying support and selling resistance.
Trendlines should connect at least two price levels in a direct path to be considered viable. The more connections that a trendline has, the more meaningful it is.
Different chart patterns identify different types of markets: sideways, uptrend, downtrend and reversing.
The purpose of using chart patterns is to identify current price action patterns and trade using signals that capitalize on them.
10 lessons from the book: “How I Made $2,000,000 in the Stock Market” by Nicolas Darvas
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“There are no good or bad stocks, there are only rising and falling stocks.”
“I did not know it but I was already coming up against one of the great pitfalls of the small operator—the almost insoluble problem of when to enter the market.”
His answer was to entry on breakouts of momentum to the upside in stocks in uptrends.
Ten lessons from my book: “The Ultimate Guide to Candlestick Chart Patterns”
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The larger the candle, the higher the volatility of price action, and the smaller a candle is, the tighter a trading range has become. Increasing candle size indicates expanding volatility, while candles getting smaller shows contracting volatility.
Hammers have a higher probability of being a valid reversal signal when found inside a chart trending downward.
10 lessons from my book “New Trader, Rich Trader.”
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“You need to focus on a sound strategy, system, and trading plan and not profits. Good trading will create your profits, but focusing on your profits will usually lead to bad trading.”
“Before you place the trade, you need to have an exit strategy of how, when, and why you will take profits and what your stop loss will be. You have to plan to sell your stock at a specific percentage loss, price support breach, or trend change.”
Ten lessons from the book “Trend Following” by @Covel
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“There are 4 kinds of bets. There are good bets, bad bets, bets that you win, & bets that you lose. Winning a bad bet can be the most dangerous outcome of all, because a success of that kind can encourage you to take more bad bets in the future, when the odds are against you.”
“We’re trying to exploit people’s reaction, which is embedded in prices and leads to trends.”
10 lessons from the book “Market Wizards” by Jack Schwager
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“ A way to determine the direction of the general market is to focus on how the leading stocks are performing. If the stocks that have been leading the bull market start breaking down, that is a major sign the market has topped.”
“Another important factor to watch is the Federal Reserve discount rate. Usually, after the Fed raises the rate two or three times, the market runs into trouble.”
What is surprising is not the magnitude of our forecast errors,but our absence of awareness of it. This is all the more worrisome when we engage in deadly conflicts: wars are fundamentally unpredictable. Owing to this misunderstanding of the causal chains between policy & action
“It is impossible for our brain to see anything in raw form without some interpretation. We may not even always be conscious of it.”