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Video on Affordable Care Act
http://www.c-span.org/flvPop.aspx?id=10737442217
Arthur Hill founded ETFInvestmentOutlook.com to give ETF traders and investors an edge using unique breadth charts and timely analysis. Mr. Hill has over 20 years experience in investment research and specializes in technical analysis. He has taught on behalf of the Society of Technical Analysts at the London School of Economics. His work has been published in Technical Analysis of Stocks and Commodities Magazine and on the Traders.com Advantage website. Prior to his current position, Mr. Hill was the Chief Technical Analyst at StockCharts.com where he developed much of the site's education center.
Work in Progress
BOT
SET UP
1 %B < 0 = YES
2 MACD HIST RED = YES
TRIGGER
3 StochRSI(20) > .20 = YES
TOP
SET UP
1 %B > 1 = NO
2 MACD HIST GREEN = NO
TRIGGER
3 StockRSI(20) < .80 = NO
Q&A with Dr. Toby Cosgrove
Sep 25, 2013
Toby Cosgrove is CEO of the Clevland Medical clinic
Gives a good idea where medicine is going.
Ted Cruz mentioned in Video
http://www.c-spanvideo.org/program/DrTo
CBO indicates OB CARE saves money.
.
http://www.c-span.org/Events/CBO-Director-Testifies-on-Long-Term-Budget-Outlook/10737441691-1/
Congressional Budget Office = CBO
Independent of both DEM and GOP
ELDER SYSTEM
Green price bars show that the bulls are in control of both trend and momentum as both the 13-day EMA and MACD-Histogram are rising.
A red price bar indicates that the bears have taken control because the 13-day EMA and MACD-Histogram are falling.
A blue price bar indicates a split or equilibrium between buying and selling pressure.
.
Time frame
The Elder Impulse System can be used across different time frames, but trading should be in harmony with the bigger trend.
EXAMPLE
60 minute should be in harmony with Daily trend
TNA_60 RULES
.
BUY
1 Previous bar = ELDER RED
2 TRIGGER bar = rise in %B, but less than .75
SELL
1 TRIGGER bar = %B DROP
or
2 STOP = PREVIOUS BAR low
MACD offers both trend following and momentum.
Positive MACD indicates that the 12-day EMA is above the 26-day EMA. This means upside momentum is increasing.
Negative MACD values indicates that the 12-day EMA is below the 26-day EMA. This means downside momentum is increasing.
A distance less than 1 point is not a big.
(1)Signal line crossovers at positive or negative extremes should be viewed with caution.
(2)Centerline crossovers are the next most common MACD signals.
A bullish centerline crossover occurs when the MACD Line moves above the zero line to turn positive. This happens when the 12-day EMA of the underlying security moves above the 26-day EMA.
A bearish centerline crossover occurs when the MACD moves below the zero line to turn negative. This happens when the 12-day EMA moves below the 26-day EMA.
Centerline crossovers can last a few days or a few months.
It all depends on the strength of the trend.
The MACD will remain positive as long as there is a sustained uptrend.
These signals can result in numerous whipsaws because strong trends did not materialize after the crossovers.
Stops required.
(3)Divergences form when the MACD diverges from the price action of the underlying security.
A bullish divergence forms when a security records a lower low and the MACD forms a higher low.
A bearish divergence forms when a security records a higher high and the MACD Line forms a lower high.
Divergences should be taken with caution.
Bearish divergences are commonplace in a strong uptrend, while bullish divergences occur often in a strong downtrend.
MACD(5,35,5) is suited for weekly charts.
The MACD is not particularly good for identifying overbought and oversold levels.
It is possible to identify levels that are historically overbought or oversold
During sharp moves, the MACD can continue to over-extend beyond its historical extremes.
User-Defined Scans: Advanced User-Definded Scans
Name
Description
01_ABOVE EMA(65) [[close>EMA(65,close) ]
and
[favorites list is 38]]
// = 0025_02_2013_D_1_YEAR
02_BELOW EMA(65) [[close
and
[favorites list is 38]]
// = 0025_02_2013_D_1_YEAR
03_ABOVE EMA(65) for SP500 [[close>EMA(65,close) ]
and
[group is SP500]]
04_BELOW EMA(65) for SP500 [[close
and
[group is SP500]]
05_RSI(14) > 70 [[type = stock] and [group is 'sp500'] and [RSI(14) > 70]]
06_RSI(14) < 30 [[type = stock] and [group is 'sp500'] and [RSI(14) < 30]]
07_ABOVE EMA(65) HF_SECTORS_ETC [[close>EMA(65,close) ]
and
[favorites list is 5] ]
// = 0029_05_Happy Family and SPY SECTORS and DJW
08_BELOW _EMA(65) HF_SECTORS_ETC [[close
and
[favorites list is 5] ]
// = 0029_05_Happy Family and SPY SECTORS and DJW
09_this week's clsoe above last week's high [[ this week's close > last week's high ]
and
[favorites list is 38]]
// = 0025_02_2013_D_1_YEAR
10_this week's close below last week's low [[ this week's close < last week's low ]
and
[favorites list is 38]]
// = 0025_02_2013_D_1_YEAR
11_this week's clsoe above last week's high HP & SECTORS [[ this week's close > last week's high ]
and
[favorites list is 5] ]
// = 0029_05_Happy Family and SPY SECTORS and DJW
12_this week's close below last week's low HP & SECTORS [[ this week's close < last week's low ]
and
[favorites list is 5] ]
// = 0029_05_Happy Family and SPY SECTORS and DJW
13_ABOVE EMA(65) HF,SECTORS,DJW,ITB,XRT [[close>EMA(65,close) ]
and
[favorites list is 5]]
// = 0029_05_Happy Family and SPY SECTORS and DJW,ITB,XRT
14_BELOW EMA(65) HF,SECTORS,DJW,ITB,XRT [[close
and
[favorites list is 5]]
// = 0029_05_Happy Family and SPY SECTORS and DJW,ITB,XRT
15_ABOVE EMA(65) for SP600 and SP400 [[close>EMA(65,close) ]
and
[[group is SP400] or [group is SP600]]]
16_BELOW EMA(65) for SP600 and SP400 [[close
and
[[group is SP400] or [group is SP600]]]
20_Total gain since Mar 2009 [favorites list is 8]
// = 0015_03_Mar 2009 to PRESENT
21_ABOVE SMA(50) [[close>SMA(50,close) ]
and
[favorites list is 38]]
// = 0025_02_2013_D_1_YEAR
22_BELOW SMA(50) [[close
and
[favorites list is 38]]
// = 0025_02_2013_D_1_YEAR
23_ABOVE SMA(200) [[close>SMA(200,close) ]
and
[favorites list is 38]]
// = 0025_02_2013_D_1_YEAR
24_BELOW SMA(200) [[close
and
[favorites list is 38]]
// = 0025_02_2013_D_1_YEAR
25_SMA(50) > SMA(200) [[sma(50,close) >SMA(200,close) ]
and
[favorites list is 38]]
// = 0025_02_2013_D_1_YEAR
26 _SMA(50) < SMA(200) [[sma(50,close)
and
[favorites list is 38]]
// = 0025_02_2013_D_1_YEAR
27_EMA(64) > EMA(320) [[sma(64,close) >SMA(320,close) ]
and
[favorites list is 38]]
// = 0025_02_2013_D_1_YEAR
28_EMA(64) < EMA(320) [[EMA(64,close)
and
[favorites list is 38]]
// = 0025_02_2013_D_1_YEAR
29_ABOVE SMA(50) HF_SECTORS_DJW_ITN_XRT [[close>SMA(50,close) ]
and
[favorites list is 5]]
30_BELOW SMA(50) HF SECTORS ITB_XRT_DJW [[close
and
[favorites list is 5]]
31_SMA(50) > SMA(200) LONG TERM UP .. [[sma(50,close) >SMA(200,close) ]
and
[favorites list is 5]]
32_SMA(50) < SMA(200) LONG TERM DOWN [[sma(50,close)
and
[favorites list is 5]]
33_ABOVE SMA(200) SECTORS [[close>SMA(200,close) ]
and
[favorites list is 5]]
34_BELOW SMA(200) SECTORS [[close
and
[favorites list is 5]]
35_%B>1 SECTORS [ [favorites list is 5]
and
[%B(20,2) > 1]]
36_%B>.5 [ [favorites list is 5]
and
[%B(20,2) > .5]]
37_%B<.5 [ [favorites list is 5]
and
[%B(20,2) < .5]]
38_%B<0 [ [favorites list is 5]
and
[%B(20,2) < 0]]
Managing Your Favorite Scans: Remove the Selected Scans
Percent Gain since Mar 2009
609 TSLA Tesla Motors Inc.
583 TNA Direxion Daily Small Cap Bull 3x Shares
429 M Macy's Inc.
376 AAPL Apple, Inc.
315 SSO ProShares Ultra S&P 500 Fund
258 XRT SPDR S&P Retail Index
234 MU Micron Technology, Inc.
212 XLY Consumer Discretionary Select Sector SPDR
162 SCTY SolarCity Corp.
161 $DJUSBT Dow Jones US Biotechnology Index
161 XLI Industrials Select Sector SPDR
158 $DJUSGM Dow Jones US Mid-Cap Growth Index
156 $DJUSGS Dow Jones US Small-Cap Growth Index
153 IWM Russell 2000 iShares
149 XBI SPDR S&P Biotech Index ETF
148 $NDX Nasdaq 100 Index
143 GOOG Google, Inc.
142 $MID S&P 400 Mid Cap Index
141 ITB iShares Dow Jones U.S. Home Construction
139 $RUT Russell 2000 Small Cap Index
136 XLF Financials Select Sector SPDR
134 $COMPQ Nasdaq Composite
132 $TRAN Dow Jones Transportation Average
129 AMGN Amgen, Inc.
124 SPY S&P 500 SPDRs
121 $BKX Bank Index - Philadelphia
121 XLV Health Care Select Sector SPDR
120 RKH Market Vectors Bank and Brokerage
115 XLK Technology Select Sector SPDR
113 $WLSH Wilshire 5000 Composite Index (full-cap)
111 XLP Consumer Staples Select Sector SPDR
110 $DJUS Dow Jones US Broad Market Index
110 BAC Bank Of America Corp.
109 $SPSUPX S&P Composite 1500 Index
106 XLE Energy Select Sector SPDR
104 $SPX S&P 500 Large Cap Index
104 JPM J.P. Morgan Chase & Co.
104 XSD SPDR S&P Semiconductor Index
103 IBM International Business Machines
102 MSFT Microsoft Corp.
102 XLB Materials Select Sector SPDR
99 $DJUSGL Dow Jones US Large-Cap Growth Index
94 $DJUSRB Dow Jones US Broadline Retailers Index
94 $INDU Dow Jones Industrial Average
92 OIH Market Vectors Oil Services
86 $DJUSHB Dow Jones US Home Construction Index
86 $NYA NYSE Composite Index
83 $DJW Dow Jones World Stock Index
79 IGN Network iShares S&P/GSTI Index Fund
78 $DJUSEN Dow Jones US Oil & Gas Index
71 XLU Utilities Select Sector SPDR
68 INTC Intel Corp.
64 SLX Market Vectors Steel
63 LH Laboratory Amer Holding Corp.
56 WMT Wal-Mart Stores, Inc.
53 AMAT Applied Materials, Inc.
46 CSCO Cisco Systems, Inc.
37 $DJUSST Dow Jones US Steel Index
33 DBC DB Commodities Tracking Index Fund
29 PCG PG&E Corp.
16 IEF iShares Barclays 7-10 Year Treasury Bond Fund
16 TLT iShares Barclays 20+ Year Treasury Bond Fund
2 $TNX 10 Year Treasury Note Yield
0.4 $UST 10-Year US Treasury Note Price (EOD)
-11 $SSEC Shanghai Stock Exchange Composite Index (EOD)
-12 X USX-US Steel Group, Inc.
-21 $DJUSCL Dow Jones US Coal Index
-25 HPQ Hewlett-Packard Co.
-41 WLT Walter Energy, Inc.
-63 ACI Arch Coal, Inc.
-65 ANR Alpha Natural Resources Inc.
-72 RWM Short Russell 2000 Fund
-87 SDS ProShares Ultra Short S&P 500
-99 TZA Direxion Daily Small Cap Bear 3x Shares
.
EXAMPLE
IWM_M
(1) SECTORS LAST MONTH
(2) Click a sector NAME gives the Industries
(3) Click an industry NAME gives the companies
.
http://stockcharts.com/freecharts/sectorsummary.html?&V=M&G=SECTOR_SPDR
BB UPDATED
(1) Candle Stick Tails out side BB = TOP/BOT
Use STOP LOSS
(2)"M" and "W" = TOP/BOT SET UP
First part out side BB
Second part in side BB
Must be confirmed by PRICE
Use STOP LOSS
BB
(1) Tails out side BB = TOP/BOT
(2)"M" and "W" = TOP/BOT SET UP
Must be confirmed by PRICE
Force Index
The Force Index is an indicator that uses price and volume
KELTNER CHANNELS
1 With an exponential moving average as its foundation, Keltner Channels are a trend following indicator.
As with moving averages and trend following indicators, Keltner Channels lag price action.
The direction of the moving average dictates the direction of the channel.
In general, a downtrend is present when the channel moves lower, while an uptrend exists when the channel moves higher.
2 A channel upturn and break above the upper trendline can signal the start of an uptrend.
A channel downturn and break below the lower trendline can signal the start a downtrend.
3 Keltner Channels Versus Bollinger Bands
There are two differences between Keltner Channels and Bollinger Bands.
(1)Keltner Channels are smoother than Bollinger Bands because the width of the Bollinger Bands is based on the standard deviation, which is more volatile than the Average True Range (ATR). Many consider this a plus because it creates a more constant width.
This makes Keltner Channels well suited for trend following and trend identification.
(2)Keltner Channels also use an exponential moving average, which is more sensitive than the simple moving average used in Bollinger Bands.
4 Even with a new uptrend established, it is often prudent to wait for a pullback or better entry point to improve the reward-to-risk ratio.
(a)StockRSI(14) or CCI(10) can be used
5 Keltner Channels are a trend following indicator designed to identify the underlying trend.
Trend identification is more than half the battle.
KELTNER Channels from Stock Charts
http://stockcharts.com/school/doku.php?st=keltner&id=chart_school:technical_indicators:keltner_channels
Trading Bias
Establishing a short-term trading bias with a long-term indicator is a recurring theme for trading strategies.
Long-term indicators are used to define the path of least resistance, which becomes the trading bias.
Traders look for bullish setups when the bias is bullish and bearish setups when the bias is bearish.
Trading in the direction of this bias is like riding a bike with the wind at your back.
The chances of success are higher when the bigger trend is in your favor.
I posted all day long yda in real time exactly what I was thinking and why I was doing what I was doing. I consider it pretty rude to ask me the question you asked when I made it very clear exactly what I did in my posts. If you don't have the time to read my posts, please don't try to understand what I am doing. Just do your thing and leave me alone.
10:04
SR60 giving sell signal, but prices reversed with 9:51 3 min bar. LOD is very close to YLOD, close enough to call a hit. YLOD good support point to watch.
10:27
Not just yet. Besides the TA limits, I also watch 3min trend at the time of the signal and look for near support points for entry.
See post 71475 that I posted just before the 10:06 mark.
SR60 giving sell signal, but prices reversed with 9:51 3 min bar. LOD is very close to YLOD, close enough to call a hit. YLOD good support point to watch.
10:51
Jaws and I have discussed this many times, but I understand if one is really not into the flow they miss key stuff. When I get a 60min signal here is what I do next.
1. Switch to my 3min chart and see what the short term trend is. As I stated, this morning the down trend reversed with the 9:51 3min bar.
2. Look for very near support. YLOD was the perfect support point. Prices had already bounced off of it once.
3. Do nothing until xx:06.
At 10:06 clearly prices were going back up and LOD would probable by my entry point.
It is really very simple. Just make sure a shorter time frame has the same trend as 60min and use support or resistance.
Not out of the woods yet, but at least I now know where I will execute a short.
SR60 giving sell signal, but prices reversed with 9:51 3 min bar. LOD is very close to YLOD, close enough to call a hit. YLOD good support point to watch.
11:19
Let's assume that the open was 10am. At 9:36 (my presumed 10:06) the 3min trend was very much down and showed no sign of reversing. I would have executed at 9:36.
But once prices has reversed as they did at the real 10:06, I probable would have used the LOD for entry.
12:15
Another short signal at 12, but so far I am ignoring it also.
* 3min prices seem to have reversed at 11:57.
*Prices are in a nice upward channel (marked on chart in iBox). Channel bottom is 103.86
* BB CL is 103.84
* Minor support at 104, better support at 103.90 and hard support at 103.70.
Bottom line, not going to get excited about doing anything until CL and channel is broken.
Hate these kind of days.
1:25
Yes everything is pointing to the 103.75-.85 area, but I still have my doubts. This is not what a turn usually looks like. Just channeling.
3:45
Looks like we are going to finish the day flat. Lots of decisions for the day, but no executions except for closing BBK trade at the open. Still made a few ticks but was not willing to risk my holdings without a profit margin built in. Don't mind so much playing with the markets money, but I hate playing with mine.
4:02
My chart and a list of all the trades are in the iBox. There were no trades this week. Don't know where you are headed, but I don't need you to log my trades. All the info is already available.
5:14
investorshub.advfn.com/boards/read_msg.aspx?message_id=90147626
This has been a very unusual month in that SR60 has only had 2 trades for the month and they were so long ago that as Jaws said, they do not appear on the chart. SR60 is long and has a gain as of EOW (end of week) of 6.9%. Normally I can count on 6-10% for the month, so it is right on target for the month. As you can read on the chart, the last trade was long on 7/3 at noon @ 98.44.
I added a longer term SR60 chart that shows the complete month and the complete ramp since 6/24.
I can appreciate that you might want to mark up a chart for yourself, but I would prefer that you not name your chart SR_60 because it is very close to SR60 which is what I have called my system for over 2 years. It would get confusing to others.
Sat 9:25
If it surprises you that SR60 has been long since 7/3 then you clearly don't understand the basic rules. Both RSI<60 and Stoc<80 are required. Yesterday was the first time RSI has dropped below 60 since 7/3. There should be no surprise.
Bollinger Bands Basic Rules
Bollinger Bands were created by John Bollinger, CFA, CMT and published in 1983. They were developed in an effort to create fully-adaptive trading bands. The following rules covering the use of Bollinger Bands were gleaned from the questions users have asked most often and our experience over 25 years with Bollinger Bands.
1. Bollinger Bands provide a relative definition of high and low. By definition price is high at the upper band and low at the lower band.
2. That relative definition can be used to compare price action and indicator action to arrive at rigorous buy and sell decisions.
3. Appropriate indicators can be derived from momentum, volume, sentiment, open interest, inter-market data, etc.
4. If more than one indicator is used the indicators should not be directly related to one another. For example, a momentum indicator might complement a volume indicator successfully, but two momentum indicators aren't better than one.
5. Bollinger Bands can be used in pattern recognition to define/clarify pure price patterns such as "M" tops and "W" bottoms, momentum shifts, etc.
6. Tags of the bands are just that, tags not signals. A tag of the upper Bollinger Band is NOT in-and-of-itself a sell signal. A tag of the lower Bollinger Band is NOT in-and-of-itself a buy signal.
7. In trending markets price can, and does, walk up the upper Bollinger Band and down the lower Bollinger Band.
8. Closes outside the Bollinger Bands are initially continuation signals, not reversal signals. (This has been the basis for many successful volatility breakout systems.)
9. The default parameters of 20 periods for the moving average and standard deviation calculations, and two standard deviations for the width of the bands are just that, defaults. The actual parameters needed for any given market/task may be different.
10. The average deployed as the middle Bollinger Band should not be the best one for crossovers. Rather, it should be descriptive of the intermediate-term trend.
11. For consistent price containment: If the average is lengthened the number of standard deviations needs to be increased; from 2 at 20 periods, to 2.1 at 50 periods. Likewise, if the average is shortened the number of standard deviations should be reduced; from 2 at 20 periods, to 1.9 at 10 periods.
12. Traditional Bollinger Bands are based upon a simple moving average. This is because a simple average is used in the standard deviation calculation and we wish to be logically consistent.
13. Exponential Bollinger Bands eliminate sudden changes in the width of the bands caused by large price changes exiting the back of the calculation window. Exponential averages must be used for BOTH the middle band and in the calculation of standard deviation.
14. Make no statistical assumptions based on the use of the standard deviation calculation in the construction of the bands. The distribution of security prices is non-normal and the typical sample size in most deployments of Bollinger Bands is too small for statistical significance. (In practice we typically find 90%, not 95%, of the data inside Bollinger Bands with the default parameters)
15. %b tells us where we are in relation to the Bollinger Bands. The position within the bands is calculated using an adaptation of the formula for Stochastics
16. %b has many uses; among the more important are identification of divergences, pattern recognition and the coding of trading systems using Bollinger Bands.
17. Indicators can be normalized with %b, eliminating fixed thresholds in the process. To do this plot 50-period or longer Bollinger Bands on an indicator and then calculate %b of the indicator.
18. BandWidth tells us how wide the Bollinger Bands are. The raw width is normalized using the middle band. Using the default parameters BandWidth is four times the coefficient of variation.
19. BandWidth has many uses. Its most popular use is to indentify "The Squeeze", but is also useful in identifying trend changes...
20. Bollinger Bands can be used on most financial time series, including equities, indices, foreign exchange, commodities, futures, options and bonds.
21. Bollinger Bands can be used on bars of any length, 5 minutes, one hour, daily, weekly, etc. The key is that the bars must contain enough activity to give a robust picture of the price-formation mechanism at work.
22. Bollinger Bands do not provide continuous advice; rather they help indentify setups where the odds may be in your favor.
A note from John Bollinger:
One of the great joys of having invented an analytical technique such as Bollinger Bands is seeing what other people do with it. These rules covering the use of Bollinger Bands were assembled in response to questions often asked by users and our experience over 25 years of using the bands. While there are many ways to use Bollinger Bands, these rules should serve as a good beginning point.
To learn more about Bollinger Bands:
Bollinger on Bollinger Bands book
Bollinger Bands DVD Covers the material from Bollinger on Bollinger Bands book
Bollinger Band DVD 2011 Covers latest work
To view a webinar covering these 22 rules, click here.
© Bollinger Capital Management. All rights reserved
4 Rules For Using THE Most Useful Technical Indicator, Double Bollinger Bands
Rating: 4.1/5 (33 votes cast)
In her new book, The Little Book of Currency Trading, renowned forex analyst Kathy Lien writes:
Of the hundreds f technical indicators out there, the Double Bollinger Bands are hands down my favorite…they provide a wealth of actionable information. They tell me whether a currency pair is in a trend or range, the direction of the trend, and when the trend has exhausted. More importantly, Bollinger Bands also identify entry points and proper places to put a stop.
While Ms Lien refers above to currency trading, her words apply to any other major financial asset to which technical analysis is applied.
Here’s a short summary of how to use Double Bollinger Bands (DBBs). This short version is for those who just need a short review of them, or who have recently viewed our two part video tutorial on them and want a quick review. Those needing more background and a full explanation of DBBs can click on the links at the end of this article to view the videos.
Why Every Serious Investor Or Trader Should Know DBBs
Most experienced traders and investors use a combination of both fundamental and technical analysis. The mix depends greatly on the both personal preferences, and especially on their preferred time frames.
Long Term Investors
They need to consider fundamentals, much more than short term traders, because most fundamental factors take time, sometimes months or many years, to fully exert their influence. For example, the long term fundamentals for Japanese or US bonds may be grim (PIMCO recently dumped their entire portfolio of US bond holdings), however the prices of these assets have yet to reflect the fading likelihood that current investors buying these will actually get the returns they anticipate, as inflation erodes both their principle and income stream. Thus long term investors select their investments more on fundamentals, and then use some technical factors to choose entry and exit points, so DBBs are relevant for them as well, and they should be familiar with the following rules for using them.
Short Term Traders
Those traders who plan to enter and exit within less than one day or just a few days, need to be much more focused on technical indicators shown on charts. While certain kinds of fundamental data like news events can have a strong short term affect on price, short term trends are mostly moved by market sentiment and resulting money flows in and out of an asset from large institutions and short term traders. The only way short term traders can gauge how these forces are likely influence short term price movements over the coming minutes, hours, or days is via technical indicators. Thus it behooves the short term traders to be very familiar with DBBs, and review the rules of their use.
For those who need more background to understand the brief presentation of the below rules, see the videos referenced at the end of this article.
We’ll be referring to the below weekly chart of the S&P 500 that runs from the week of July 2008 – April 3 2011, though the indicator should work on a chart in any time frame for any asset.
ScreenHunter 01 Apr 06 13 28 1024x665 4 Rules For Using THE Most Useful Technical Indicator, Double Bollinger Bands
CHART 1: S&P 500 WEEKLY CHART COURTESYOF ANYOPTION.COM July 18 2008 – April 3, 2011
01apr06 1328
The 4 Rules For Using Double Bollinger Bands
RULE 1: GO SHORT WHEN PRICE IS IN OR BELOW THE DOUBLE BB SELL ZONE (BOUNDED BY THE LOWER RED AND YELLOW BOLLINGER BANDS)
As long as price remains within or below the lower 2 BBs, the downward momentum is strong enough so that there is a high probability that the trend will continue. This is the time to enter new short positions. Exit and take profits when price moves above this zone.
For example, looking at the SP 500 index weekly chart, if we zoom in on Q3 of 2008 shown below, from the week of September 7th (down arrow) until the week of December 14th (up arrow), the odds favored maintaining short positions for those trading off weekly charts.
CHART 2: S&P 500 WEEKLY CHART COURTESY OF ANYOPTION.COM
week of Sept. 7th – Dec. 14th
04apr06 1353
Because the downtrend needs strong momentum to enter the buy or sell zones, Double Bollinger Bands are distinctly lagging indicators and thus not suited for catching less sustained though perfectly tradable trends. For example, if you would have solely relied on DBBs during the Greek stage of the EU debt crisis that occurred in the spring of 2010, you would not have gone short the index until the trend was mostly finished.
Note the chart below.
CHART 3: S&P 500 WEEKLY CHART
COURTESY OF ANYOPTION.COM
Week of April 25 – August 1
06apr06 1402
So as good as DBBs are, like any other indicator they need to be used in combination with other technical and fundamental evidence.
RULE 2: GO LONG WHEN PRICE IS IN OR ABOVE THE DOUBLE BB BUY ZONE (BOUNDED BY THE UPPER RED AND YELLOW BOLLINGER BANDS)
As long as price remains within or above the lower 2 BBs, the upward momentum is strong enough so that there is a high probability that the trend will continue higher. This is the time to enter new long positions. Exit and take profits when price moves below this zone.
For example, looking at the SP 500 index weekly chart below, we zoom in on July 27 – Sept. 27 highlighted by the red arrows the odds favored maintaining long positions for those trading off weekly charts. If look at the chart above for the period of July 2008 – Mid March 2011, it’s clear that this indicator would have kept you in for most of the multi-year uptrend and gotten you out before most of the major selloffs played out.
CHART 4: S&P 500 WEEKLY CHART COURTESY OF ANYOPTION.COM
Week of July 27 2009 – Sept. 27 2009
09apr061443
RULE 3: DON’T TRADE BASED ON DBBs WHEN PRICE IS BETWEEN THE BUY AND SELL ZONES
When price is in the middle zone of the 1 standard deviation Bollinger Bands (in red), the trend isn’t strong enough to trust, so don’t trade it, unless you have enough other fundamental evidence or signals from your other technical indicators that suggest the trend will continue.
See Chart 5 below for examples when this did and didn’t work during the EU Crisis (Greek Stage) of 2010.
Chart 5: S&P 500 WEEKLY CHART – GREEK STAGE OF EU DEBT CRISIS 2010 COURTESY OF ANYOPTION.COM
Red Arrows Highlighting weekly candles of April 25 2010, May 16 2010, Sept. 12 2010
12APR06 1507
For example, in late April 2010, according to this Rule 3 I should not have been short until the week of May 16, highlighted by the left-most up arrow.
However, there was a growing chance that the EU might not bail out Greece in time to avoid a market collapse, so I didn’t wait to start taking at least some short positions – the fundamentals (and other technical signals I was watching) were enough to justify ignoring Rule 3.
My fundamental thesis: If the collapse of just 1 major bank (Lehman brothers) crashed markets in September of 2008, imagine what a national default (and wave of defaults that would follow as no one would lend to the other weak EU economies could do.
So that was a classic case of when to ignore rule 3, and of the need to find that balance between using too little evidence to see the full picture, and using so much that it paralyses you and prevents you from taking action. In the spring of 2010 DDBs were just not enough.
However, Rule 3 would have worked well in keeping you out of the choppy range bound action into the spring and early summer of 2010, highlighted by the two red up arrows in Chart 5. It’s harder to trade profitably when there is no clear trend.
RULE 4: MINIMIZE RISK BY WAITING UNTIL PRICE RETRACES TO THE CHEAPER END OF THE BUY OR SELL ZONE, OR TAKE PARTIAL POSITIONS
This rule attempts to reduce the risk of buying at the top or selling at the bottom that comes when chasing a strong trend, while minimizing the risk that instead of catching a bargain, you catch a ‘falling knife.’
This rule is not easy to implement. Your success depends on how well you read the other technical and fundamental evidence, and how well you are able to understand if you’re catching a bargain or a falling knife.
THUS THE KEY QUALIFICATION TO RULE 4: THERE ARE NO MAJOR CONTRADICTIONS FROM OTHER TECHNICAL INDICATORS OR FUNDAMENTAL DATA THAT SUGGEST THE TREND IS IN FACT EXHAUSTED. If there are, stand aside, don’t trade.
For example, look at Chart 6 below.
Chart 6: S&P 500 WEEKLY CHART COURTESY OF ANYOPTION.COM
14apr06 1536
The rule worked well if you bought at the cheap end of the buy zone during the week of Sept. 27 2009 (first down red arrow), there you caught a bargain. However if you bought at the close of the week of April 25, 2010, you caught a falling knife, as a threatened Greek default set off a sharp 4 week pullback. The key was to recognize that the fundamentals were so bad that they outweighed the suggested bargain of Rule 4.
What would have saved you? In addition to reasonable stop losses (which we ALWAYS USE, RIGHT?), rule 4 also suggests taking partial positions when entering strong trends, like 1/3rd of your total planned position if you can’t wait for the retracement to the cheaper end of your buy or sell zone, another 1/3rd if/when you get the retracement, and another 1/3rd when if you get a bounce back into the buy or sell zone.
CONCLUSION AND SUMMARY
Double Bollinger Bands are incredibly useful, but like any technical indicator, must be used in combination with other evidence, the precise nature of which depends on your style of trading and timeframe.
Here’s a brief summary of the 4 rules for using DBBs.
•RULE 1: GO SHORT WHEN PRICE IS IN OR BELOW THE DOUBLE BB SELL ZONE ( BOUNDED BY THE LOWER RED AND YELLOW BOLLINGER BANDS)
•RULE 2: GO LONG WHEN PRICE IS IN OR ABOVE THE DOUBLE BB BUY ZONE ( BOUNDED BY THE UPPER RED AND YELLOW BOLLINGER BANDS)
•RULE 3: DON’T TRADE BASED ON DBBs WHEN PRICE IS BETWEEN THE BUY AND SELL ZONES
•RULE 4: MINIMIZE RISK BY WAITING UNTIL PRICE RETRACES TO THE CHEAPER END OF THE BUY OR SELL ZONE, OR TAKE PARTIAL POSITIONS. Qualification: do not attempt ‘bargain hunting’ if there is significant evidence that the trend is not merely testing support but in fact reversing. If evidence suggests a reversal may be forming, then avoid the trade, or take only partial positions until the trend resumes, and use stop losses to minimize damage if in fact the trend you’re playing breaks down.
Want the full story on Double Bollinger Bands? For more details view the following videos.
PART 1 – HOW TO TRADE TRENDS SERIES BOLLINGER BANDS: This one provides background information that those not familiar with Bollinger Bands might need. It includes material on the original single set Bollinger Bands of John Bollinger himself, and how Kathy Lien added a second set of bands to create a more useful tool for trading trends.
PART 2 – HOW TO TRADE TRENDS SERIES BOLLINGER BANDS: This one is a continuation of Part 1.
THE 4 RULES OF HOW TO USE DOUBLE BOLLINGER BANDS: This one is a summary version of Parts 1 & 2, and just focuses on the 4 rules for using Double Bollinger bands, illustrated with examples of when these did and didn’t work on the S&P 500 Weekly chart.
A final note: If you prefer to trade strong trends, consider trading them with binary options. For pure trend traders they can be an ideal complement to your trading, because they simplify much of the risk management decisions that turn winning trades into losers. All you have to do is predict the direction of the trend in your preferred time frame, and even if the trend only moves fractionally in your direction, your profit is usually about 70%, even if you were only trading on an hourly basis.
reply #2 to Trend1 - as you are aware, I am no longer visiting or reading Glen's board here, so please contact me via email you obtain for me from Glen privately
I do want to complete my communication with you by offering one more item beyond your first hour analysis inquiry:
Robert Peirce helped found this company, and is a well recognized veteran among the more seasoned veteran analytical professionals -
http://cooksonpeirce.com/
over the years, the Power Index concept appears to be an important mix in his assessment criteria for how much longer to remain exposed long or short in the market and when to reverse direction with his exposure or go flat for a period of time.
I do know that John Bollinger has his own development of the Power Index metric data set, and you may want to consider contacting John for cost of obtaining this information within one of his subscription packages -
http://www.grouppower.com/support/?s=market
I am not able to say more without stepping on intellectual property rights, but I mention this to you Trend1 because I understand you to be very conservative and methodical about your assessment of price and indicator trends, and I believe the Power Index data set is right up your alley
as a compliment to the Power Index info. I do recommend you think about a subscription to John Bollinger's Capital Growth Letter, because I personally believe any technician will benefit from the pairing of the Power Index analysis with the CGL specific recommended market exposure symbol selections
http://www.bollingercapital.com/site/resource
in my opinion, some things are worth paying for ... some things
are worth understanding well since we are betting our own money and taking risk
take care, Trend1
Trend1 - reply from "rimshot"-- best I can do for ideas right now since I have been in full-on work mode today from 4 a.m. until midnight, Trend1 - I need to travel to my other home location where the small and simple book is located in that personal library before I can quote you the book title to the one specific book which provides a description of price bar analysis and clustering patterns using 5-min or 15-min price bars is actionable, based on my experience ...he explains it clearly, but I will tell you that I believe Jay Yu's approach for this core of what you are trying to accomplish is even more reliable for betting real money and money of any size such as 300k or more per trade lot, then you want to learn about the application of mini pups, pups, inverse pups and the stochastic setups that confirm the formations...you can google Jay Yu at Amazon - his first name has alternate spellings.. I have his private email address and can ask Glen to email that to you if you have Glen's email yourself ... give Jay a request and tell him I sent you and ask for a free one week trial to his paid chat room, and you will see him real-time apply the stochastic analysis to trade entry and exit decisions and manage the risk aspect of the decision before finalizing action.
I teamed up with another serious and conservative trader and we learned Jay's methods over an 18-month intensive mutual exchange of charting Jay's methods using stockcharts and software programs ... it was definitely worth our time, and you can start with one of Jay's older books, The Secrets of the Underground Trader - I can snail mail the book to you if you like. Give Glen your address, and I will ask Glen to forward to me so I can mail you the book on loan and you can keep it up to six months...it is hard cover early printing version that I have
more ideas --
Ned Davis’ book -- Being Right (making good predictions) vs. Making Money.
In the first chapter --- he asserts being a good forecaster is not at the heart of making money in the markets.
----------------
Gary Anderson's book - The Janus Factor
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Michael Mauboussin's book - The Success Equation - if interested in determining how much of the trading outcome is due to skill and how much is due to luck. reversion to the mean is thoroughly addressed.
------------------
The mathematical definition of risk is standard deviation:
* an important topic for a trader to both understand and practice habitual discipline
David Salsburg book - The Lady Tasting Tea: How Statistics Revolutionized Science in theTwentieth Century
------------------
Murray Gunn book -
Trading Regime Analysis
is a groundbreaking work on how markets behave and how to profit from this behaviour.
Offers in detail the methods that can be used to identify whether a market is about to start trending or about to enter a period of range trading.
Highlights important applications for this analysis for institutional investors, asset allocators, hedge fund managers and retail investors.
Provides unique content as there are no existing titles on trading regime analysis.
----------
Walter Deemer - read any of his books
he is a veteran, and very conservation is his approaches ... very good with actionable breadth analysis to support trend staying power assessments for price forecasting
Richard Rhodes' Trading Rules
I must admit, I am not smart enough to have devised these ridiculously simple trading rules. A great trader gave them to me some 15 years ago. However, I will tell you, they work. If you follow these rules, breaking them as infrequently as possible, you will make money year in and year out, some years better than others, some years worse - but you will make money. The rules are simple. Adherence to the rules is difficult.
"Old Rules...but Very Good Rules"
If I've learned anything in my decades of trading, I've learned that the simple methods work best. Those who need to rely upon complex stochastics, linear weighted moving averages, smoothing techniques, Fibonacci numbers etc., usually find that they have so many things rolling around in their heads that they cannot make a rational decision. One technique says buy; another says sell. Another says sit tight while another says add to the trade. It sounds like a cliche, but simple methods work best.
1.
The first and most important rule is - in bull markets, one is supposed to be long. This may sound obvious, but how many of us have sold the first rally in every bull market, saying that the market has moved too far, too fast. I have before, and I suspect I'll do it again at some point in the future. Thus, we've not enjoyed the profits that should have accrued to us for our initial bullish outlook, but have actually lost money while being short. In a bull market, one can only be long or on the sidelines. Remember, not having a position is a position.
2.
Buy that which is showing strength - sell that which is showing weakness. The public continues to buy when prices have fallen. The professional buys because prices have rallied. This difference may not sound logical, but buying strength works. The rule of survival is not to "buy low, sell high", but to "buy higher and sell higher". Furthermore, when comparing various stocks within a group, buy only the strongest and sell the weakest.
3.
When putting on a trade, enter it as if it has the potential to be the biggest trade of the year. Don't enter a trade until it has been well thought out, a campaign has been devised for adding to the trade, and contingency plans set for exiting the trade.
4.
On minor corrections against the major trend, add to trades. In bull markets, add to the trade on minor corrections back into support levels. In bear markets, add on corrections into resistance. Use the 33-50% corrections level of the previous movement or the proper moving average as a first point in which to add.
5.
Be patient. If a trade is missed, wait for a correction to occur before putting the trade on.
6.
Be patient. Once a trade is put on, allow it time to develop and give it time to create the profits you expected.
7.
Be patient. The old adage that "you never go broke taking a profit" is maybe the most worthless piece of advice ever given. Taking small profits is the surest way to ultimate loss I can think of, for small profits are never allowed to develop into enormous profits. The real money in trading is made from the one, two or three large trades that develop each year. You must develop the ability to patiently stay with winning trades to allow them to develop into that sort of trade.
8.
Be patient. Once a trade is put on, give it time to work; give it time to insulate itself from random noise; give it time for others to see the merit of what you saw earlier than they.
9.
Be impatient. As always, small loses and quick losses are the best losses. It is not the loss of money that is important. Rather, it is the mental capital that is used up when you sit with a losing trade that is important.
10.
Never, ever under any condition, add to a losing trade, or "average" into a position. If you are buying, then each new buy price must be higher than the previous buy price. If you are selling, then each new selling price must be lower. This rule is to be adhered to without question.
11.
Do more of what is working for you, and less of what's not. Each day, look at the various positions you are holding, and try to add to the trade that has the most profit while subtracting from that trade that is either unprofitable or is showing the smallest profit. This is the basis of the old adage, "let your profits run."
12.
Don't trade until the technicals and the fundamentals both agree. This rule makes pure technicians cringe. I don't care! I will not trade until I am sure that the simple technical rules I follow, and my fundamental analysis, are running in tandem. Then I can act with authority, and with certainty, and patiently sit tight.
13.
When sharp losses in equity are experienced, take time off. Close all trades and stop trading for several days. The mind can play games with itself following sharp, quick losses. The urge "to get the money back" is extreme, and should not be given in to.
14.
When trading well, trade somewhat larger. We all experience those incredible periods of time when all of our trades are profitable. When that happens, trade aggressively and trade larger. We must make our proverbial "hay" when the sun does shine.
15.
When adding to a trade, add only 1/4 to 1/2 as much as currently held. That is, if you are holding 400 shares of a stock, at the next point at which to add, add no more than 100 or 200 shares. That moves the average price of your holdings less than half of the distance moved, thus allowing you to sit through 50% corrections without touching your average price.
16.
Think like a guerrilla warrior. We wish to fight on the side of the market that is winning, not wasting our time and capital on futile efforts to gain fame by buying the lows or selling the highs of some market movement. Our duty is to earn profits by fighting alongside the winning forces. If neither side is winning, then we don't need to fight at all.
17.
Markets form their tops in violence; markets form their lows in quiet conditions.
18.
The final 10% of the time of a bull run will usually encompass 50% or more of the price movement. Thus, the first 50% of the price movement will take 90% of the time and will require the most backing and filling and will be far more difficult to trade than the last 50%.
There is no "genius" in these rules. They are common sense and nothing else, but as Voltaire said, "Common sense is uncommon." Trading is a common-sense business. When we trade contrary to common sense, we will lose. Perhaps not always, but enormously and eventually. Trade simply. Avoid complex methodologies concerning obscure technical systems and trade according to the major trends only
Trading TNA_3_60 and TZA_3_60
Question ?
Does the touch of the LOWER BB(20,3) on the TNA_3
give the lowest BUY on the TNA_60 ?
Answer:
Let's work on this.
TNA_3 and TZA_3
(1) SELL = Touch of upper BB(20,3)
(2) BUY = Touch of Lower BB(20,3)
More testing required. IMHO.
TRADING TNA_60 and TZA_60
ENTRY
BUY = LOW RISK
(1) Sto near or below 20
(2) Price near lower BB(20,2)
(3) Break of SEC TREND to UP SIDE
(4) Close above SMA(1,1,H)
EXIT
(1) Touch of upper BB(20,2)
(2) Lower HIGH and with in the BB(20,2)
(3) 2 RED CANDLES (2 RC)
..........................................
GREEN = BUY
RED = SHORT
BLUE = TO CASH
BLACK = STOP
2 RC = Start Sec Trend
2 RC = SELL
1 BC = TOP ?
Trading TNA_3 and TZA_3
ENTRY
(1) HIGHER LOW INSIDE BB(20,2)
(2) LOWER VOL
(3) SLOW STO(14,1) near 20
(4) STOP just below previous low
EXIT
(1) Move away from BB(20,2)
(2) Slow STO moving down
Donchian Trading Guidelines
Introduction
First published in 1934, many of the 20 trading guidelines from Richard Donchian are as relevant today as they were during the golden age of technical analysis. Considered by many as the father of trend following, Donchian developed one of the first trend following systems based on two different moving averages, which were cutting edge in the early thirties. Based on his experiences over time, Donchian developed 20 trading guidelines split into two groups: general and technical. The guidelines shown below have been paraphrased for a clearer explanation. The original guides are also shown in the bottom half of this page.
Eleven General Guidelines
1. Be careful buying when the crowd is excessively bullish or selling when the crowd is excessively bearish. Even when the crowd is correct, excessive sentiment in one direction or another can delay a move.
2. When prices trade in a narrow range with little volatility, look for a volume increase to confirm the direction of the next move. Subsequent strength on higher volume is bullish, while subsequent weakness on higher volume is bearish.
3. Let your profits run and cut your losses short. This guideline overrides any other guideline.
4. Trade in smaller amounts during times of uncertainty. Trading losses and whipsaws can be reduced by focusing on solid setups and robust signals.
5. Do not chase a position after a three day move. Wait for a one-day reversal to improve the risk-reward ratio.
6. Use a stop-loss to limit losses and protect accrued profits. Stop-losses should be based on the trading pattern at work. A triangle pattern will have a different stop-loss structure than a rising wedge or head-and-shoulders pattern. 7. Due to the law of percentages, long positions should be larger than short positions during a broad uptrend. This assumes that the upswings will be larger than the downswings as a series of rising peaks and troughs evolves. A short position on a decline from 50 to 40 would produce a 20% profit, but a long position on an advance from 40 to 50 would produce a 25% profit. The percentage gain on advances will be greater and the trading amount should also be greater.
8. Use limit orders when initiating a position. Use market orders when closing a position.
9. Buy securities that are in uptrends and show relative strength. Sell securities that are in downtrends and show relative weakness. These two guidelines are subject to all other guidelines.
10. A broad market advance is more likely to continue when transportation stocks lead (Dow Transports). A broad market advance is suspect when transportation stocks lag.
11. A security's capitalization, its activity level in the marketplace and its trading characteristics are just as important as its fundamentals. (The interpretation of this guideline is rather difficult because it is unclear what Donchian means with "capitalization").
Nine Technical Guidelines
12. A consolidation or sideways trading range after an initial advance often leads to another advance of equal proportions. After this second advance, chartists can expect a counter move and decline back towards the consolidation. Similarly, a consolidation or sideways trading range after an initial decline often leads to another decline of equal proportions. After this second decline, chartists can expect a counter move and advance back towards the consolidation.
13. A long sideways consolidation after an advance marks future resistance. Expect resistance or a bearish reversal when prices decline and then return to this level. A long sideways consolidation after a decline marks future support. Expect support or a bullish reversal when prices advance and then return to this level.
14. Look for buying opportunities when prices decline to a trendline on average or low volume. Conversely, look for selling opportunities when prices advance to a trendline on average or low volume. Be careful if prices stall around the trendline (hug) or if the trendline has been touched too often.
15. Prepare for a bearish trendline break when prices decline to a rising trendline, fail to bounce and subsequently crawl along the trendline. Prepare for a bullish trendline break when prices advance to a falling trendline, hold most of their gains and crawl along the trendline. Repeated bumping of a trendline also increases the chances of a break.
16. Major trendlines define the longer trend. Minor trendlines define the shorter trend. When prices are above a major trendline (rising), use minor trendlines (falling) to define short pullbacks and generate buy signals with upside breaks. When prices are below a major trendline (falling), use minor trendlines (rising) to define short bounces and generate sell signals with downside breaks.
17. Triangles are usually broken on the flat side. This means an ascending triangle is usually broken with an upside breakout, while a descending triangle is usually broken to the downside. Chartists must look for other clues to determine if a triangle signals accumulation or distribution.
18. Look for a volume climax to signal the end of a long move. An extended advance sometimes ends with a volume surge that marks a blow-off . Conversely, an extended decline sometimes ends with a volume surge that marks a selling climax.
19. Not all gaps are filled. Breakaway gaps signal the start of a new trend and are not filled. Continuation gaps mark a continuation of the existing trend and are not filled. Exhaustion gaps mark a trend reversal and are filled. Chartists should not count on a gap being filled unless they can determine what kind of gap it is, which is easier said than done.
20. During an advance, initiate or add to long positions after a one day decline, no matter how small the decline and especially when the decline is on lower volume. During a decline, initiate or add to short positions after a one-day advance, no matter how big the bounce and especially if the bounce is on lower volume.
Summary of Art Hill's book
Define the Trend and Trade the Trend.
Got it for $9.95 at Stock Charts Store.
................................................
Summary of System
1 Find the Primary Trend. I prefer to use the weekly daily channel.
2 Trade only in the direction of the Primary Trend.
3 Trade only the end of Secondary Trend when you see a confirmation of it's end, such as a break out.
................................................
page 1 To identify trades that make financial sense, traders need to answer the following questions.
1 What is the direction of the bigger trend ?
2 When is a good time to buy or sell within this trend ?
3 What do smaller counter trend movements look like ?
4 How do I know when a counter trend move is ending ?
5 Where do I set my profit target and stop-loss ?
..................................................................
page 2 TA uses price and indicators to identify trends and forecast price movements in a tradable security.
..............................................................
page 4 Indicators, by definition ,are derived from price, which means the price data has been processed with a formula.
A moving average is a lagging indicator.
A momentum oscillators like MACD, RSI, STO, etc are leading indicators.
.................................................................................
page 8 While one or two indicators can enhance analysis, three or more will often distort the true picture.
................................................................
page 10
The price chart tells us every thing we need to know to take a calculated risk.
--------------------------------------------------------------------------------
page 10
1 Define the bigger trend.
2 Identify the smaller counter trend.
3.Estimate length of these counter trend moves.
4 Spot price action that signals the end of the counter trend.
5 Set Profit and stop loss levels to assess trade potential
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Page 10 Long positions have a greater chance of success when the trend is UP.
Short positions have a greater chance of success when the trend is DOWN.
.................................................................
Art Hill's book only mentions a few indicators like MACD and ROC. No mention of RSI
..............................................
Art Hill only uses price action in this book
.....................................
page 11 Bullish and bearish continuation patterns signal a temporary stop or slow down with in the on going trend.
These patterns provide chartists with an opportunity to buy a stock with less risk and more reward.
....................................................................................................
page 12 A position should not be taken until a confirmation is seen. Example: A break out.
....................................................................................................
page 14 This may sound obvious, but chartist should not try to guess the top in an up trend nor a bottom in a down trend.
In other words , chartists should not second guess the market because these trends are there for a reason.
This reason may not be immediately clear, but it will likely manifest itself in the future.
.............................................................................
page 31 How do you know when the trend has actually reversed ?
The first sign of weakness occurs when prices fail to exceed their prior peaks.
Despite reduced buying pressure, a down trend does not officially start until selling pressure increases
enough to push prices below the prior trough.
A lower peak and a lower trough signal that selling pressure has triumphed and a down trend has started.
...........................................................
page 25 Defining trend direction is the first step to seeing what is actually there.
Get the trend correct and your changes of success increase.
Get the trend wrong and your chances of success decrease.
As the dominant force, the trend is expected to continue until proven otherwise with a price reversal.
In other words, forecast is for higher prices when the trend is up.
While the trend will reverse one day, reversals are more the exception and continuations are more the norm.
A trend in motion stays in motion.
Trades have a much better chance of making money by betting on trend continuations instead of trend reversals.
This is the essence of trend following.
...............................................................................
page 29 Though certainly not perfect, peak and trough analysis is often superior to moving average analysis for trend
identification.
My comment: And confirmation of other methods.
.....................................................
page 35 BULLISH REVERSAL PATTERNS
1 inverse H&S
2 Double bottoms
3 Rectangle bottoms
4 Symmetrical triangles
..............................................
page 37 There are 3 clear processes to a reversal:
1 Prices were trending down and selling pressure dominates.
2 Prices moved sideways. Except when using channels.
3 Prices break resistance as buying pressure over powers selling pressure.
NOTE: The pattern is not confirmed until the break out.
......................................................
page 45 Rectangles
Must have a least 2 peaks and 2 troughs.
..........................................
page 51 Calculating the Reward-to-Risk Ratio
The reward-to-risk is based on price target and stop loss.
It is important to note that price targets are "soft" estimates.
Prices will reach and exceed some price targets, but they will also fall short on occasion.
Once the price target is set, the chart will change as new price bars are added.
Chartists must continually reassess the price chart, price target, and stop loss.
Adjustments will be required to cut losses, maximize profits and prevent profits from slipping.
.........................................................
page 52 One of many examples of how targets and stop losses are used to calculated Reward-to-Risk ratio
is show on chart below.
PLD_D
.
..........................................................
page 59 Taking advantage of throwbacks
Classical TA teaches the broken resistance turns into support.
page 61 Throwbacks often happen after break outs.
Giving traders a second chance to buy because broken resistance turns into support.
page 59 Taking Advantage of Throwbacks see example below
XOM_D
...............................................................
page 64 Validating Patterns with GAPS
A price gap should be considered in the context of the bigger picture.
Below is an example.
ACN_D
............................................................
Chapter 6 Bullish Continuation Patterns
page 106 A decline back to the prior low would indicate that another pattern is taking shape.
page 107 A 50% retrace of a prior advance is a healthy.
Two steps up and one step back is healthy.
..............................................................
Chapter 7 Bearish Continuation Patterns
.............................................................
Chapter 8 Esimating Reversal Zones
page 159
Estimating Reversal Zones
(1) Dow Theory asserts that secondary moves retrace 33% to 66%
(2) Chartist can use Fib Retracement of 38.2% to 61.8%
..................................................
page 162 In an imperfect world, it does not make sense to use one retracement to anticipate the end of a secondary price movement.
Instead chartists can define a reversal zone.
A move into this zone increases the chances that the secondary move is nearing an end.
The natural starting point for the zone is 50 percent because it is between the two Fibonacci numbers 38 and 61% and the two Dow Theory numbers 33 and 66 %.
In fact 50 percent represents the sweet spot because it is the ideal retracement for a trend, taking two steps forward and one step back wards.
These Zones are not fail proof. They mainly alert the chartists to pay closer attention to price action.
Once the trade begins with a break out , and the trend is still in place.
A new high can be expected.
.........................................................................................
Page 171 A trader who does not use stops will eventually take the mother of all losses.
............................................................
*****CURRENT SYSTEM:
1 Define the PRIMARY trend with weekly, daily and 60 minute channels. GREEN
2 Identify the SECONDARY counter trend with channel and/or trend line. RED
3.Estimate reversal area of counter moves using fib 38 to 62 %
4 Wait for break out of SECONDAY trend.
5 Determine entry based on GAP OPEN and/or break of trend line.
6 Estimate if there is going a PULLBACK.
7 Place STOP LOSS at recent low.
8 Calculate target and if RRR > 2.
9 EXIT trade at 2 red candles or other indicators.
..........................................................
*****Buying opening GAP RULES
(1) Only buy opening gaps in the direction of PRI trend
and only if there is break of SEC TREND.
(2) If opening gap has no break of SEC TREND, expect PULLBACK.
NOTE: Limited back testing.
.........................................................
RRR1 = FIB 50%
RRR2 = FIB 33%
RRR3 = FIB 25%
Summary of Art Hill's book
Define the Trend and Trade the Trend.
Got it for $9.95 at Stock Charts Store.
................................................
Summary of System
1 Find the Primary Trend. I prefer to use the weekly daily channel.
2 Trade only in the direction of the Primary Trend.
3 Trade only the end of Secondary Trend when you see a confirmation of it's end, such as a break out.
................................................
page 1 To identify trades that make financial sense, traders need to answer the following questions.
1 What is the direction of the bigger trend ?
2 When is a good time to buy or sell within this trend ?
3 What do smaller counter trend movements look like ?
4 How do I know when a counter trend move is ending ?
5 Where do I set my profit target and stop-loss ?
..................................................................
page 2 TA uses price and indicators to identify trends and forecast price movements in a tradable security.
..............................................................
page 4 Indicators, by definition ,are derived from price, which means the price data has been processed with a formula.
A moving average is a lagging indicator.
A momentum oscillators like MACD, RSI, STO, etc are leading indicators.
.................................................................................
page 8 While one or two indicators can enhance analysis, three or more will often distort the true picture.
................................................................
page 10
1 Define the bigger trend.
2 Identify the smaller counter trend.
3.Estimate length of these counter trend moves.
4 Spot price action that signals the end of the counter trend.
5 Set Profit and stop loss levels to assess trade potential
.................................................................
Art Hill's book only mentions a few indicators like MACD and ROC. No mention of RSI
..............................................
Art Hill only uses price action in this book
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page 11 Bullish and bearish continuation patterns signal a temporary stop or slow down with in the on going trend.
These patterns provide chartists with an opportunity to buy a stock with less risk and more reward.
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page 12 A position should not be taken until a confirmation is seen. Example: A break out.
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page 14 This may sound obvious, but chartist should not try to guess the top in an up trend nor a bottom in a down trend.
In other words , chartists should not second guess the market because these trends are there for a reason.
This reason may not be immediately clear, but it will likely manifest itself in the future.
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page 31 How do you know when the trend has actually reversed ?
The first sign of weakness occurs when prices fail to exceed their prior peaks.
Despite reduced buying pressure, a down trend does not officially start until selling pressure increases
enough to push prices below the prior trough.
A lower peak and a lower trough signal that selling pressure has triumphed and a down trend has started.
...........................................................
page 25 Defining trend direction is the first step to seeing what is actually there.
Get the trend correct and your changes of success increase.
Get the trend wrong and your chances of success decrease.
As the dominant force, the trend is expected to continue until proven otherwise with a price reversal.
In other words, forecast is for higher prices when the trend is up.
While the trend will reverse one day, reversals are more the exception and continuations are more the norm.
A trend in motion stays in motion.
Trades have a much better chance of making money by betting on trend continuations instead of trend reversals.
This is the essence of trend following.
...............................................................................
page 29 Though certainly not perfect, peak and trough analysis is often superior to moving average analysis for trend
identification.
My comment: And confirmation of other methods.
.....................................................
page 35 BULLISH REVERSAL PATTERNS
1 inverse H&S
2 Double bottoms
3 Rectangle bottoms
4 Symmetrical triangles
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page 37 There are 3 clear processes to a reversal:
1 Prices were trending down and selling pressure dominates.
2 Prices moved sideways. Except when using channels.
3 Prices break resistance as buying pressure over powers selling pressure.
NOTE: The pattern is not confirmed until the break out.
......................................................
page 45 Rectangles
Must have a least 2 peaks and 2 troughs.
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page 51 Calculating the Reward-to-Risk Ratio
The reward-to-risk is based on price target and stop loss.
It is important to note that price targets are "soft" estimates.
Prices will reach and exceed some price targets, but they will also fall short on occasion.
Once the price target is set, the chart will change as new price bars are added.
Chartists must continually reassess the price chart, price target, and stop loss.
Adjustments will be required to cut losses, maximize profits and prevent profits from slipping.
.........................................................
page 52 One of many examples of how targets and stop losses are used to calculated Reward-to-Risk ratio
is show on chart below.
PLD_D
.
..........................................................
page 59 Taking advantage of throwbacks
Classical TA teaches the broken resistance turns into support.
page 61 Throwbacks often happen after break outs.
Giving traders a second chance to buy because broken resistance turns into support.
page 59 Taking Advantage of Throwbacks see example below
XOM_D
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page 64 Validating Patterns with GAPS
A price gap should be considered in the context of the bigger picture.
Below is an example.
ACN_D
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Chapter 6 Bullish Continuation Patterns
page 106 A decline back to the prior low would indicate that another pattern is taking shape.
page 107 A 50% retrace of a prior advance is a healthy.
Two steps up and one step back is healthy.
..............................................................
Chapter 7 Bearish Continuation Patterns
.............................................................
Chapter 8 Esimating Reversal Zones
page 159
Estimating Reversal Zones
(1) Dow Theory asserts that secondary moves retrace 33% to 66%
(2) Chartist can use Fib Retracement of 38.2% to 61.8%
..................................................
page 162 In an imperfect world, it does not make sense to use one retracement to anticipate the end of a secondary price movement.
Instead chartists can define a reversal zone.
A move into this zone increases the chances that the secondary move is nearing an end.
The natural starting point for the zone is 50 percent because it is between the two Fibonacci numbers 38 and 61% and the two Dow Theory numbers 33 and 66 %.
In fact 50 percent represents the sweet spot because it is the ideal retracement for a trend, taking two steps forward and one step back wards.
These Zones are not fail proof. They mainly alert the chartists to pay closer attention to price action.
Once the trade begins with a break out , and the trend is still in place.
A new high can be expected.
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Page 171 A trader who does not use stops will eventually take the mother of all losses.
............................................................
*****CURRENT SYSTEM:
1 Define the PRIMARY trend with weekly, daily and 60 minute channels. GREEN
2 Identify the SECONDARY counter trend with channel and/or trend line. RED
3.Estimate reversal area of counter moves using fib 38 to 62 %
4 Wait for break out of SECONDAY trend.
5 Determine entry based on GAP OPEN and/or break of trend line.
6 Estimate if there is going a PULLBACK.
7 Place STOP LOSS at recent low.
8 Calculate target and if RRR > 2.
9 EXIT trade at 2 red candles or other indicators.
..........................................................
*****Buying opening GAP RULES
(1) Only buy opening gaps in the direction of PRI trend
and only if there is break of SEC TREND.
(2) If opening gap has no break of SEC TREND, expect PULLBACK.
NOTE: Limited back testing.
.........................................................
RRR1 = FIB 50%
RRR2 = FIB 33%
RRR3 = FIB 25%
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