Identifying chart patterns is simply a system for predicting stock market trends and turns!
Hundreds of years of price charts have shown that prices tend to move in trends. (I’m sure we’ve all heard the saying, ‘the trend is your friend’.) Well, a trend is merely an indicator of an imbalance in the supply and demand. These changes can usually be seen by market action through changes in price. These price changes often form meaningful chart patterns that can act as signals in trying to determine possible future trend developments.
Research has proven that some patterns have high forecasting probabilities. These patterns include: The Cup & Handle, Flat Base, Ascending and Descending Triangles, Parabolic Curves, Symmetrical Triangles, Wedges, Flags and Pennants, Channels and the Head and Shoulders Patterns. In my opinion, these are some of the best patterns to trade.
This section is designed to introduce you to some of these chart patterns, as well as teach you to identify repetitions in the market qualities, to make timely and more accurate decisions when predicting market trends.
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I first started trading when I was 15. I was fond of the stockmarket, but due to my limited capital I could only buy one share. When I eventually choose the stock I wanted, It didn’t go up or down. It just kept bouncing around. In the end, I sold the stock with a 5% loss. I was still following the stockmarket, but I decided for myself I needed something more volatile with more leverage. I discovered options, futures an CfD’s. But they still were to unpredictable. Eventually, I found my holy grail: Forex. I read all what I could read about it and made some first profits. I discovered the power of something as simple as the BGX system or Vegas. I started studying these methods more closely and realized that these simple models could make you very profitable in the long run. Over time, I started to adapt the systems with my onw rules. The biggest advantage of the Sidus Method is that it is not necessary for adding extra filters. Whipsaws will occor, but less frequent. This system made my trading very profitable as it easy to understand, easy to implement and easy to find the right entry-points.
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Here we go again. Jittery financial market participants have extrapolated a case of indigestion, and some heartburn, into the “big one.” But, recent market action looks much more like a panic attack than a heart attack.
Yesterday’s market sell-off (small cap stocks fell 3%, and the Dow Jones Industrial Average was down 226 points), has convinced many that problems in the sub-prime market are spreading.
Significantly worse than expected Q2 earnings at Countrywide Financial, and problems in financing a few large leveraged business deals, have caused pessimistic market participants to fear an economy-wide credit crunch.
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This overview covers a very basic, but powerful reversal trading pattern. There are two versions of the pattern. The primary pattern is called a Gartley. The second pattern is a variation of the Gartley and is called a Butterfly. The Gartley pattern is named after H. M. Gartley who wrote a book in 1935 called “Profits in the Stock Market”. Pages 200-250 of his book display a library of patterns that cover all the patterns in the market ever discussed. You may have heard the phrase “Gartley 222” when referring to this pattern because the pattern is found on page 222 of H. M. Gartley’s book.
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Category 1
Only trade in the direction of the trend (Trend is determined by a rising or falling Point Of Control/POC)
Trade setup #1a: In a down trending market, when the current session opens below the previous day’s Value Area/VA enter a short trade at the previous day’s lower VA and again at the previous day’s POC/HVL placing a protective stop for both trades 1.5 points above the previous day’s upper VA.
Trade setup #1b: In an up trending market, when the current session opens above the previous day’s VA enter a long trade at the previous day’s upper VA and again at the previous day’s POC/HVL placing a protective stop for both trades 1.5 points below the previous day’s lower VA
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Every off-floor trader would like to get a feel for how things really are on the exchange floor. Mastering Market Profile may help you get it.
Worried that you’ll never be able to compete with the floor traders? After all, they’re right there in the middle of the action. They’re privy to information that off-floor traders see late or maybe never. Once you start using Market Profile, however, you may find yourself with more information than the floor trader. No longer will floor traders, decked out in their colored jackets, frantically gesturing and scrambling to make themselves heard and seen by other traders, seem chaotic, intimidating, or bizarre. Instead, with the use of Market Profile, you will see the order in the markets.
J. Peter Steidlmayer developed Market Profile in the 1980s in conjunction with the Chicago Board of Trade. Traders who use it say that they get an in-depth understanding of the market, contributing to improved trading. Many factors can be monitored from Market Profile.
Market Profile is not an indicator in the typical sense. It does not provide buy/sell recommendations but acts more like a decision-support tool. It organizes the data so that you can understand who is in control of the market, what is perceived as fair value, and the direction of the price move. It is possible to extract enough information from Market Profile for you to position your trades more advantageously.
Market Profile is useful for the pit trader as well as the offfloor trader. The indicator can help the off-floor trader get a better sense of the market; prior to the introduction of Market Profile, only floor traders had access to this information. Although all references here refer to using futures contracts, Market Profile can be used just as effectively for other tradables. Software vendors such as Cqg and WindoTrader provide Market Profile displays for equities.
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The Bank for International Settlements, the world’s most prestigious financial body, has warned that years of loose monetary policy has fuelled a dangerous credit bubble, leaving the global economy more vulnerable to another 1930s-style slump than generally understood.
“Virtually nobody foresaw the Great Depression of the 1930s, or the crises which affected Japan and Southeast Asia in the early and late 1990s. In fact, each downturn was preceded by a period of non-inflationary growth exuberant enough to lead many commentators to suggest that a ‘new era’ had arrived”, said the bank.
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The recent breakdown in long-dated bonds was interesting and potentially significant, but the action at the short-end of the market has been even more interesting. What we are referring to is the extraordinary divergence since mid March between the yield on a 3-month T-Bill and the yield on a 2-year T-Note, with the 3-month yield falling from 4.85% to 4.55% in parallel with a rise in the 2-year yield from 4.55% to 4.97%. The following chart illustrates the divergence.
(http://www.bloomberg.com/markets/rates/index.html)
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Part 1: http://tradinglib.com/indicators/murrey-math#more-53
Murrey Math Reversal Percentage Moves
- The following notes are observations regarding the Murrey Math Price Percentage Moves (MMRPM). The MMRPM statistics are a key Murrey Math factor to consider when evaluating a trade. The MMRPM statistics are also key in understanding the importance and function of the Square in Time.
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The Gimmee bar comes from one of the oldest formations known to traders, the reversal bar at the end of rising or falling prices when a market is seen overall to be going sideways. Although the recognition of reversal bars is ancient, using them in combination with Bollinger Bands is not ancient. Until the advent of computers, it was much too difficult and time consuming to calculate the bands. Virtually all software worth anything these days can put the bands on a chart for you, so we’ll not waste time here with the mathematics. Suffice it to say that the bands are so constructed that when set with a 20 bar moving average of the close at two standard deviations, approximately 96.5% of all closes will be contained within the bands. Here’s how the bands look. How to trade the Gimmees will follow:
GIMMEE BARS ARE NOTHING MORE THAN REVERSAL BARS THAT TAKE PLACE ONCE PRICES HAVE REACHED THE UPPER OR LOWER BANDS IN A SIDEWAYS MOVING MARKET.
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