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Japan shows a clear pattern of higher lows holding into a ~9 month long resistance area. This is a pattern that often sets up a breakout, but in this case the pattern is on the weekly chart and could presage a significant advance above that resistance. The assumption is that
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Systematic traders have a perennial debate: how much or how little to intervene in your system's rules? There are a range of acceptable solutions, but the key is to be very consistent. If you will fiddle, then fiddle, but if you say you are a purely systematic trader,
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[dc]I[/dc]f you are a discretionary trader, you might also consider using some trading systems. In my published research, I publish three types of trades: purely discretionary trades (on both weekly and daily timeframes), a pullback system, and a longer-term trend following system. These systems were carefully selected
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A pattern in volatility can sometimes give a directional tilt to the market, but, more importantly, how do we know when a trade is wrong and what do we do about it?
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Too many times, when people talk about "trading patterns" they are focusing on entry patterns. Yes, it is important to have patterns that show a positive expectancy, but the decisions made after trade entry, what we call trade management, probably contribute more to profitability than entry location. Some
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Volatility contraction sets the stage for a selloff.
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[dc]T[/dc]echnically speaking, the chart of Gold is complicated and unclear. To recap: the second half of 2011 saw a sharp collapse in prices. This selloff found support around 1600 (1,550 on this back-adjusted chart), a level which was tested at least 4 times on the weekly
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Today's chart of the day will be a little different. Take a look at this table which shows 2 week, 1, 3, 6, and 12 month returns for every trading day in the S&P 500 from 2/3/1960 – present (13,241 trading days.) Notice first
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One of the tools I use to evaluate market action is the standard deviation spike, which expresses each day's return a standard deviation of the previous 20 trading days. (This tool is also discussed in The Art & Science of Technical Analysis .) This gives an important perspective on
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Long-time market leader consistently outperforming broad market, sector and peers. Check. Positive earnings surprise. Check. Several days of tight consolidation at highs. Check. This is an excellent technical setup to enter a long position on a breakout of the small consolidation. Of course, no technical setup works all the time,
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The most important levels in markets are those that are clearly visible to all market participants. The July pivot high in Soybeans is a good example of an important level to watch. A failure test (think 2B short entry) at this level would present a serious challenge to the integrity
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Volatility contraction is an important element of market action. Essentially, when a market has been quiet for a period of time, there is a higher chance of breakout trades working, or of any sharp move seeing continuation (for several bars.) Though there are many ways to quantify this volatility contraction,