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

Chapter 6 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 7 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

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
Contents ix

Favorite Market Internals 143

A Quick Overview of Intermarket Analysis 157

In Summary 158

Chapter 9 Relative Strength: Relative Strength Defined 159

Chapter 10 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

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

Chapter 15 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

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