Candlesticks, Fibonacci, and Chart Pattern Trading - Forex Factory

 A SYNERGISTIC STRATEGY TO ENHANCE

PROFITS AND REDUCE RISK

Many investors are unhappy with the performance of investment advisors and funds in the past couple of years and want to make their own trading decisions, using the analytic tools and the advice they have accumulated. This book presents easy, reliable trading tools, together with the trading rules to apply them to real-time trading.

Many investment strategies have been presented in books, market letters, and other media. In this book, we describe those tools that appear to work best, and we integrate them into a manageable and understandable trading strategy. Combining different strategies correctly can improve every investor’s chances of success under different market conditions. Most importantly, we concentrate on strategies that every experienced investor can easily understand and execute with the WINPHI charting program that is provided on a  at

the end of this book.

With all the sophisticated computer models that are available,

you might think that investing and making money would be getting

easier. But just the opposite has happened. At no time in history has

so much money been lost so fast, and not only the small investors have

suffered. The big investment companies also have had unimpressive

performances even though presumably they had all the necessary tools

to beat the markets. This clearly shows that crunching numbers with

a computer does not ensure success. For many years, we have concentrated on pattern recognition, a technique with proven reliability even

when computers are not available.

CONTENTS

CHAPTER 1 TRADING PSYCHOLOGY AND

INVESTOR BEHAVIOR 1

CHAPTER 2 THE MAGIC FIGURE THREE 7

CHAPTER 3 BASIC PRINCIPLES OF TRADING STRATEGIES 9

Fibonacci Analysis 9

Candlestick Analysis 24

Chart Pattern Analysis 32

Trend Lines and Trend Channels 41

CHAPTER 4 APPLICATIONS OF TRADING STRATEGIES 45

Double Tops and Double Bottoms 45

Fibonacci Price Corrections 52

Fibonacci Price Extensions 67

Candlestick Chart Patterns 77

3-Point Chart Patterns for Trend Reversals 88

PHI-Channel Applications 108

CHAPTER 5 PHI-ELLIPSES 115

Basic Features and Parameters of PHI-Ellipses 116

Working with PHI-Ellipses on Daily Data 132

PHI-Ellipses on Constant Scales 150

Working with PHI-Ellipses on Intraday Data 155

Reliability of PHI-Ellipses Reconsidered 162

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CHAPTER 6 MERGING CANDLESTICKS, 3-POINT CHART

PATTERNS, AND FIBONACCI TOOLS 167

Fibonacci Price Correction Levels 168

Fibonacci Price Extensions 187

Support and Resistance Lines 195

PHI-Ellipses 207

Summary 218

SOME FINAL REMARKS 221

TUTORIAL 227

LIST OF ABBREVIATIONS 229

DISCLAIMER 231

USER MANUAL WINPHI GETTING STARTED 233

INDEX 251

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TRADING PSYCHOLOGY AND INVESTOR BEHAVIOR

The market price of a stock at any exchange never represents the company’s fair value. The stock instead is trading either above or below that valuation. Over the past couple of years, the potential discrepancy between market capitalization and fair value became painfully obvious to investors. Supported by analysts’ unrealistic price forecasts, many high-tech stocks reached untenable high prices and then, in some instances, became worthless because there was no real value behind these companies.

In general, the market price fluctuates higher or lower around the fair value, depending how the market sentiment values the company.

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