Trading Tools and Tactics

Introduction: The Journey Begins xi CHAPTER 1 Subjective Doesn't Work in the Market: Technical Analysis Is the Objective Standard 1 The Guru Syndrome 1 The Pitfalls of Fundamental Analysis 2 Technical Indicators: Adding Subjectivity to the Chart 5 Approaching the Markets Objectively 8 In Summary 14 CHAPTER 2 Candlestick Analysis: Using the Language of Candles to Profit from Market Moves 17 A Single Candle 18 Multiple Candle Formations 21 Failure Is Not Always Bad 29 In Summary 31 CHAPTER 3 Support and Resistance: Price Is King 33 Price Patterns 33 Recognizing Reference Points 36 The Two Forms of Support and Resistance: Major and Minor 40 How Support and Resistance Areas Form 46 In Summary 56 CHAPTER 4 Moving Averages the Right Way: Visual Aids to Price Action 57 A Valuable Technical Measurement 57 Convergence Can Help 63 Moving Averages as Focal Areas 67 Staying Objective 69 A Few Good Rules While Using Moving Averages 74 Other Points to Consider 75 Moving Averages to Find Plays 78 In Summary 79 CHAPTER 5 Volume Is Money: Commitment to Prices 81 The Fallacies of Volume 81 Using Volume Properly 85 The Primary Uses of Volume 87 Volume As It Relates to Tradability 98 In Summary 101 CHAPTER 6 Retracement Analysis: Using Retracement Analysis to Continue Your Move 103 The Concept of Retracements 103 To Retrace or Not to Retrace? 106 Retracements Imply a Trend 107 Continuing To Keep It Objective 111 What Lies Beyond 60 Percent? 111 Retracement Levels in Downtrends 114 A Special Retracement Pattern 115 Retracement Levels in Sideways Trends 117 What Lies Beyond 100 Percent? 118 The Bigger Picture 121 In Summary 123 CHAPTER 7 Bar-by-Bar Analysis: Each Bar Tells Us Something 125 Objectivity Is Still the Goal 126 A Quick Review of Individual Bars 126 How the Bars Interact 128 Additional Thoughts 135 In Summary 137 CHAPTER 8 Market Internals: Examining the Direction of the Market 139 Determining Price Movement 141 When to Be Different 143 Favorite Market Internals 143 A Quick Overview of Intermarket Analysis 157 In Summary 158 CHAPTER 9 Relative Strength: Relative Strength Defined 159 Identifying Different Types of Relative Strength 160 Is Relative Strength Always Good? 166 Relative Strength and Weakness with Morning Gaps 170 Relative Strength with Sector Analysis 172 Relative Strength to Market Internals 173 In Summary 174 CHAPTER 10 The Trend Is Your Friend: There Are Only Three Directions 177 What Makes a Trend? 178 Pivots 178 When Pivots Come Together 182 Some Subjective Guidance 186 Keeping It Clean 188 Checking the Reaction 192 Final Thoughts 198 In Summary 200 CHAPTER 11 Shoot the Gap: What Is a Gap? 203 What Causes a Gap? 206 Fallacies about Gaps 207 Gaps and the Daily Chart 209 The Intraday Play 214 In Summary 219 CHAPTER 12 Frame-by-Frame: The Concept of Multiple Time Frames 221 Which Time Frames? 221 The First Goal of Using Multiple Time Frames 223 A Powerful Concept Emerges 228 Warning Signs in the Micro Trend 230 Hidden Patterns 233 In Summary 236 CHAPTER 13 Making Failure Work for You: Recognizing When Patterns Fail 239 Did the Play Stop, or Did the Pattern Fail? 241 When Good Patterns Fail 242 Capitalizing on Predictable Failures 246 Expected (or Unexpected) Failure 248 In Summary 250 CHAPTER 14 Manage the Trade and the Money: The Missing Link 253 Managing the Money--Share Size 253 How Much to Risk 257 Managing the Money--Throughout the Day 259 Considerations When Swing Trading 260 Basic Trade Management Concepts 262 Managing the Trade--Staying with the Trend 264 Managing the Trade--Zooming Down 265 In Summary 267 CHAPTER 15 Getting Through a Typical Trading Day: Strategies to Incorporate into Your Daily Routine 271 Beginning Your Day 271 Planning Your Trade, Trading Your Plan 273 After the Close 275 Maximizing the Winners, and Handling the Losers Properly 277 CHAPTER 16 There Is Only One Truth in the Markets 279 Price Is King 279 Appendix A: Abbreviations 283 Appendix B: Trade Types 285 Glossary 287 About the Companion Website 299 Index 301