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Profiting from Technical Analysis and Candlestick Indicators: Powerful Methods for Accurately Timing Trades

Book Description

Time your trades more accurately and reliably! The secret is to combine western technical analysis with eastern candlestick methods. In Profiting from Technical Analysis and Candlestick Indicators, top trader and best-selling author Michael C. Thomsett shows you how. Using more than 100 easy-to-understand visuals, Thomsett explains why candlesticks complement traditional resistance/support-based analyses rather than contradicting or competing with them. One step at a time, you'll learn how to use them together to identify crucial reversal and confirmation signals more rapidly and reliably. You'll learn how to use each system to gain cross-confirmation and strengthen the reliability of your predictions; uncover reversal signals in both systems; forecast pricing; recognize signal failures and false leads; profit from swing trading; and reduce risk. Profiting from Technical Analysis and Candlestick Indicators will be valuable to wide audiences of professional and institutional investors, experienced individuals or institutional portfolio managers, and all experienced traders who use technical analysis for guidance.

Table of Contents

  1. About This eBook
  2. Title Page
  3. Copyright Page
  4. Contents
  5. Acknowledgments
  6. About the Author
  7. Introduction: The Self-Fulfilling Prophecy
  8. 1. Charting Techniques—Predicting the Future
    1. The Desire for 100%
    2. Articulating Risks in Trading Policy
    3. The Hypothesis—Relative Correlation
    4. Identifying the Errors of Popular Charting Beliefs
    5. Requirements for Proof of What Works
  9. 2. Traditional Analysis—The Power of Pattern Recognition
    1. Charts and Directional Identification
      1. Double Tops and Bottoms
      2. Price Gaps
      3. Triangles
      4. Wedges
      5. Trendlines and Channel Lines
    2. Testing the Pattern
    3. Bringing Order to the Pattern: Measuring the Trading Range
    4. Accuracy in Prediction
    5. Validating the Pattern
    6. Measuring the Trend
  10. 3. Candlestick Patterns—Recognizing Evolving Strength or Weakness
    1. Candlestick Comprehension
    2. A Review of the Candlestick and Its Attributes
    3. The Ten Candlesticks and Their Attributes
    4. Six Basic Candlestick Formations
    5. Examples of Ten Candlesticks
      1. Three Black Crows Pattern
      2. Three Stars in the South Pattern
      3. Three-Line Strike Bull Pattern
      4. Three-Line Strike Bear Pattern
      5. Three White Soldiers Pattern
      6. Identical Three Crows Pattern
      7. Bearish Engulfing Pattern
      8. Morning Star Pattern
      9. Bearish Belt Hold Pattern
      10. Mat Hold Pattern
    6. Pitfalls: Scaling and False Signals
  11. 4. Reversal Signals—Spotting the Turning Point
    1. Recognition
    2. Proximity
    3. Confirmation
    4. Failed Signals
  12. 5. Continuation Signals—The Mid-Trend Signs
    1. Retracement Versus Reversal
    2. Strength and Weakness—Candlestick Signals
    3. Strength and Weakness—Western Signals
  13. 6. Combining West and East—Candlesticks and the Technical Signs
    1. Combinations in Different Time Spans
    2. Continuation Combination Patterns
    3. Bullish and Bearish Combinations Together
  14. 7. Confirmation—An Essential Second Part of a Signal
    1. Relative Correlation and Inertia
    2. Multiple Confirmation Patterns
    3. Examples of Strong Reversal
    4. Examples of Weak Reversal
    5. Examples of Strong Continuation
    6. Examples of Weak Continuation
    7. Maximum Versus Minimum Conditions
    8. Contradiction as a Different Kind of Relative Correlation
  15. 8. Support and Resistance—Key Price Points in the Trend
    1. How Much Time Is Needed to Establish Support or Resistance?
    2. Stationary and Dynamic Formations
    3. Breadth of Trading—Growing or Shrinking Formations and Channels
    4. Proximity Is Key
    5. Flips
    6. Are Support and Resistance Valid Price Predictors?
  16. 9. Moving Averages—Finding Statistical Correlation
    1. Types of Chart-Based Moving Averages
    2. Two-Line Averages and Double Crossover
    3. Price Interaction with Averages
    4. Combining Moving Averages with Support and Resistance
    5. Moving Average Signals: Bollinger Bands
  17. 10. Volume Indicators—Confirmation of Price
    1. Volume Spikes
    2. On Balance Volume (OBV)
    3. Accumulation/Distribution (A/D)
    4. Money Flow Index (MFI)
    5. Chaikin Money Flow (CMF)
    6. Chaikin Oscillator
  18. 11. Momentum Indicators—The Exhaustion Point
    1. Price Momentum Versus Trend Momentum
    2. Relative Strength Index (RSI)
    3. Stochastic Oscillator
    4. Moving Average Convergence Divergence (MACD)
  19. 12. Signal Failures and False Indicators—The Misguiding Signal
    1. Candlestick Indicator Conflicts
    2. Continuation Versus False Reversal Indicators
    3. Confusion Between Triangles and Wedges
    4. Failed Signals Between Price and Volume
    5. Failed Signals Between Candlesticks and Momentum
  20. 13. Beyond the Signal—Candlestick Pattern Moves
    1. Mood of the Market for Directional Change
    2. Candlestick—Trends of 3s
    3. Candlestick Top and Bottom Patterns
    4. Candlestick Lines and Waves
  21. 14. Risk Reduction Methods—Using Charting Techniques to Manage Risk
    1. Assumptions That Add to Risk
    2. Technical Analysis Beyond Speculation
    3. Applying Multiple Signals
  22. A. Hypothesis Summary
    1. Ten Key Western Signals (Chapter 2)
    2. Ten Candlesticks with High-Performance Rankings (Chapter 3)
    3. Relative Correlation Basic Hypothesis: Proximity and Strength (Chapter 1)
    4. Hypothesis Regarding the Strength of Reversal Signals (Chapter 7)
    5. Hypothesis Regarding the Strength of Continuation Signals (Chapter 7)
    6. Hypothesis Regarding the Nature of Weak Reversal and Continuation Signals (Chapter 7)
    7. Hypothesis Regarding the Nature of Continuation for Breakouts Versus Trends (Chapter 8)
    8. Hypothesis Regarding Strong Signals That Contradict One Another (Chapter 10)
    9. Hypothesis Statement Concerning Signal Failures and False Indicators (Chapter 12)
  23. B. Hypothesis Testing
  24. Endnotes
    1. Chapter 1, “Charting Techniques—Predicting the Future”
    2. Chapter 3, “Candlestick Patterns—Recognizing Evolving Strength or Weakness”
    3. Chapter 7, “Confirmation—An Essential Second Part of a Signal”
    4. Chapter 10, “Volume Indicators—Confirmation of Price”
    5. Chapter 14, “Risk Reduction Methods—Using Charting Techniques to Manage Risk”
  25. Index
  26. Financial Times Press