Breakout
What happens if you miss a trade? Newer traders will often make a frustrated FOMO trade, and add a loss to what should have been a non-event. More experienced traders gain the self control to move on—this happens and it’s just part of the game. But sometimes we
Climax
Bands or channels are usually set up around some type of moving average. They define what is normal for a market, so excursions outside the bands are potentially interesting. There are many ways to create bands. Two of the most common are Bollinger Bands and Keltner Channels. (We prefer Keltners
Quantitative analysis
I want to share the results of a quick statistical study I did today, and also share a few thoughts about using stats, in general, to shape our trading decisions. (And I promise two things: this won't be a boring blog and if you trade actively, it will
General Comments
This week, in our pattern analysis group, we’re looking at Trend Termination plays. This terminology might be a bit confusing at first. It stems from a system I came up with when I wrote my first book, under which I noted that we can categorize all technical, directional trades
Pullback
Pullback
I have found, over the years, solid results from trading a handful of patterns put in the proper context. Perhaps the most useful of those patterns in the pullback, which is simply a pause in an ongoing trend. Of course, how well you do trading pullbacks will depend on a
Anti
Recent action in copper futures gives us some market lessons. These can be adapted to other markets and timeframes (so if you just trade stocks or currencies, don’t skip over this because it’s a futures market!) I’ll try to keep this as short as possible, but there
Pullback
One of the key challenges for discretionary traders is balancing short-term and longer-term information. Err too far on either side, and bad things will happen: Focus too much on short-term, and we are overly responsive to every jiggle of the market, constantly stopped out by market noise. Focus too much
Trend Termination
One of the themes I've written on recently is that we need to be careful how we think about trend change and end of trend patterns. I think too much of noise, particularly in social media, is focused on trying to take a position against a trend so
General Comments
Take a look at this picture which I took a few years ago, on a Friday afternoon, on a New York / New Jersey ferry. After a long and stressful work week (it was 2008), the gentleman in the photo was more than a little inebriated (i.e., could barely stand
Trend Termination
Let's talk about endings today. If we can better understand the patterns that often occur when trends end, we are better equipped to manage risk, place stops, and, in general, to trade those trends. Crude oil provides a good example of a dangerous ending in a specific kind
Pullback
Effective trading patterns are usually simple. The more complicated an idea is, the more likely it is the result of trying to fit very random data (i.e., the market) into a preconceived mold. I think many of the patterns and ratios of traditional technical analysis are the result of