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charts is through pattern analysis that is based on the tendency of charts to repeat the same formations over and over again. |
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Over the years, through observation and back testing, analysts have identified and promulgated scoresif not hundredsof chart patterns that produce known trading results. |
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What do we mean by "known trading results"? We mean that an analyst will study a particular, common chart patternsay a "double top"and may test that pattern back through years of data and on hundreds of different stocks to see what the profit and loss outcomes are each time that pattern is found. After extensive analysis, it can be said with certainty that the pattern will produce a winning trade 53.8 percent of the time. |
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On top of that, the analyst will be able to tell you two other pieces of information: (1) how much capital you need to risk to produce the desired results, and (2) how much profit (reward) you can expect from this pattern. As you will see, knowing your risk and reward points in a particular pattern will be vitally important to you! |
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Is that valuable information? Could you use information like that to improve your trading performance? Is it possible to get such information? Yes, yes, and yes! |
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A Process for Trading Success |
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Let's lay out the steps of a logical trading process that can start producing for you immediately. |
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Become Proficient at Trading Techniques |
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You must be able to enter and exit the trade efficiently. The earlier chapters of this book focused on: choosing a direct access broker, configuring your system and Internet access, developing self-awareness, learning market fundamentals, and understanding charts. |
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We are not trying to teach you everythingjust the things you need to make money, starting right now. |
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Learn to Recognize Chart Patterns |
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Memorize patterns that produce a known percentage of winning trades, and that give you proven risk and reward parameters. That's what you'll |
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